Agri Business

Coffee prices should recover in 2 years: ICO’s Sette

Vishwanath Kulkarni Bengaluru | Updated on October 17, 2019


For several years now, coffee growers worldwide have been reeling under the impact of low prices on excess supplies as growth in production outpaced consumption. However, prices have stabilised now as the downtrend has stopped and a recovery is expected in about two years, says Jose Dauster Sette, Executive Director of the International Coffee Organisation (ICO), the apex inter-governmental body of the producing and consuming nations. In an interview with BusinessLine on the sidelines of a curtain-raiser to announce ICO’s World Coffee Congress, which will be held in Bengaluru in September 2020, Satte said boosting consumption can help offset rising production. Excerpts:

I think there are a couple of aspects — Brazil, the world largest producer has a biannual cycle - One year on and one year off. We are coming back to the on year again. If it is a very strong production year, that will have a continued negative impact on prices. If we can grow consumption at a faster rate, then that will alleviate all our problems. World consumption is growing at 2 per cent a year.

If we can make consumption grow faster, it will help everybody. This is not a short-term solution. India is a key market for global consumption growth.

Coffee consumption in India is very low at 100 grams per person, per year. Countries like Brazil consume 6 kg per person every year. India has a huge middle class, larger than the whole population of Brazil. There’s an enormous potential to grow the consumption here. Boosting consumption is mainly the work of the private sector. In many countries generic promotion campaigns have played a significant role, which is something that can be studied. Measuring consumption is a big challenge. There are many challenges especially in producing countries. It is hard to measure the crop. If you don’t know what the crop is, then it is hard to measure all the other parts of the equation. So, what we know is that consumption is less volatile than production. It varies less from year-to-year. And the overall trend I think we know well. This 2 per cent growth in global consumption is very robust, and there is widespread agreement in the coffee world about it.

There is no widespread agreement on the production. So there is a lot of divergence and controversy.

Prices have stabilised over the last year at a very low level. Hopefully within two years we should see signs of recovery. Even analysts feel prices have bottomed out.

It is still in the early stage. We hope that consumers will become more and more conscious of all the work and the effort that is required to grow their cup of coffee and that they will make this known to the roasters so that the roasters will feel the need to look at the beginning of the supply chain and support the growers better.

Published on October 17, 2019

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