Agri Business

ICO allays fears of Brazilian frost

Anil Urs Bangalore | Updated on May 10, 2011 Published on May 10, 2011

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The International Coffee Organisation (ICO) allays fears of frost and its impact on coffee output in Brazil.

“This time of the year the market traditionally starts speculating about the possible risk of frost in Brazil during winter. However, changes in the location of Brazilian production in recent decades mean that the risk of frost has diminished considerably,” ICO said in its latest monthly coffee market report.

The fear of Brazilian frost has led to speculative price movements driven by the precarious balance between supply and demand accentuated the firmness in arabica prices during April. Coffee prices, particularly those of arabicas, reached new highs in April.

“The monthly average of the ICO composite indicator price in April was 231.24 compared to 224.33 US cents per pound (lb) in March 2011, the highest monthly level recorded since June 1977. On the other hand price volatility decreased compared to March,” the report said.

Dollar Impact

Despite the firmness in prices, the depreciation of the US dollar reduced export earnings of many exporting countries, in particular Brazil, Colombia, Guatemala, India, Indonesia and Mexico.

The US Dollar Index, calculated in relation to a basket of six major currencies, fell to 72.93 on April 29 from 75.83 on April 4, its lowest level since April 22, 2008, when the level of 71.32 was recorded.

The report said: “Moreover, prices of oil products have continued to rise, further increasing costs of the important production factors in the coffee supply chain, such as transport and fertilisers.”

Exports by all exporting countries during March 2011 reached a new high of 10.4 million bags, bringing the cumulative total for the first six months of coffee year 2010-11 (October 2010 – March 2011) to nearly 53 million bags against 45.8 million bags for the same period in coffee year 2009/10, an increase of 15.4 per cent.

Total exports during the last 12 months (April 2010 – March 2011) reached 101 million bags, the highest level ever recorded. Encouraged by relatively high prices, exporting countries have increased their exports in the last few months.

Published on May 10, 2011
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