Coffee body sees prices ruling firm this year

Developments such as tight supply, buoyant consumption in emerging countries and low stock levels indicate that coffee prices will remain firm during 2011.

The International Coffee Organisation (ICO) said in its market report: “Market fundamentals continue to be favourable to the support of high price levels. Adverse weather is still disrupting harvesting and transportation in many exporting countries, thereby affecting short-term coffee supplies.”

Despite high production in crop year 2010-11, Brazil's domestic consumption has continued to grow. In crop year 2011-12, the first official estimates published by CONAB, the government agency responsible for agricultural estimates, indicate a crop of between 41.9 and 44.7 million bags, the highest level recorded for a low production year in the biennial cycle.

Production is expected to be slightly lower in Vietnam, while significantly lower production is anticipated in Indonesia and several exporting countries as a result of unfavourable weather conditions.

ICO said: “Colombia will find it difficult to return to its former production level since many coffee trees have been affected by coffee leaf rust and access to appropriate treatment is limited by the high cost of inputs.

“On the other hand, the information received from other exporting countries, particularly from Ethiopia and some other African countries, has led to an upward revision of the preliminary estimate to around 135 million bags.”

Market Fundamentals

According to ICO, production in 2010-11 is estimated at 134.6 million bags, a rise of 11.8 million bags (9.6 per cent) over the previous year. Most of this increase will be in Arabica, which is expected to grow by 10.8 million bags (almost 15 per cent). Robusta is expected to rise by under one million bags (nearly 2 per cent).

An increase of 7.5 per cent is expected in the Mexico and Central America region, mainly due to increased production in El Salvador, Guatemala, Honduras and Mexico. In Asia and Oceania, production is expected to decrease slightly in Vietnam and significantly in Indonesia due to adverse weather.

In Colombia, an increase in production is expected. But the coffee industry is still experiencing difficulties, particularly as a result of the outbreak of disease, especially coffee leaf rust.

Brazil

The ICO report said, “It should be noted that crop year 2010-11 is a high production year in Brazil and recent estimates by the coffee authorities indicate a total production of 48.1 million bags.

“Brazil's crop year 2011-12 will begin in the next few months and production will be lower in accordance with the biennial production cycle for arabicas. The level of this decrease may, however, be reduced due to advances in agricultural practices that should make it possible to reduce pronounced fluctuations in production from one year to the next.”

Exports in November totalled 7.7 million bags, bringing the volume exported during the first 11 months of 2010 to 87.1 million bags as against 88.3 million bags for the same period in 2009, a fall of 1.4 per cent. Brazilian exports were the highest recorded for November, indicating a strong demand for Brazilian coffee as a replacement for those origins in short supply.

Preliminary information on global consumption in 2010 indicates a level of at least 131 million bags compared to 130 million bags in 2009. Data on consumption in the five leading importing countries (France, Germany, Italy, Japan and the US) indicate consumption of 37.3 million bags during the period January to September against 36.5 million bags for the same period in 2009.

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