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Monthly Magazine Published by Coffee Board
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In The News ________________________
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Source: Buisness Line
By:
Buisness Line,
Mumbai,
Friday, January 23,2004
Rebound in world Coffee Prices
Has the coffee market finally broken the jinx of low prices? International coffee prices rebounded in December, after declining in the previous two months. Producers are looking at the market with some optimism because after five successive years of excess supplies, there is now the possibility of a correction, thanks to lower crop in Brazil in 2003-04.
Brazil's preliminary official estimates indicate that production levels will also be low in the crop year 2004-05, according to International Coffee Organisation (ICO). The year begins in April 2004.
At 52.44 cents per pound in December 2003, the monthly average of the ICO composite indicator price was up 5.3 percent as compared with 49.81 cents/lb in the previous month. Thankfully, price movements even early this month seemed to consolidate the upward trend of the previous month. With the price at 56.16 cents/lb on January 9, versus 52.65 cents/lb on December 30.
The New York futures market, which is sensitive to the situation of Arabicas, was up by 4.73 percent, with the average for the 2nd and 3rd positions at 65.82 cents/lb in December compared to 62.85 cents in November.
On the London futures market which trends mainly in robustas, the average for the 2nd and 3rd positions rose by 5.02 percent from 31.28 cents/lb in November to 32.85 cents in December.
According to ICO, for the crop year 2003-04, total production is estimated at 102.48 million bags compared to 119.95 million in 2002-03, a decline of nearly 15 percent. Production for the crop year 2002-03 was the highest recorded since 1965-66, which aggravated the existing situation of excess supply over demand.
Anticipated production in 2003-04 will help to interrupt this trend, eventually leading to a supply shortfall in relation to demand given the reduction in available stocks.
With harvest almost complete for 2003-04, Brazilian coffee output at 28.46 million bags was down over 40 percent from 48.48 million bags of 2002-03.
The first preliminary official estimate for production in 2004-05 ranges between 34.11 million and 37.47 million bags, an increase of over 20 percent.
Brazilian production was characterised by a marked biennial cycle, since trees needed to recover after production and abundant crop, the ICO said adding that for 2004-05, opinions as to the size of the crop are bound to differ.
Weak prices are believed to have had a significant impact on coffee growers.
Some farmers, heavily in debt, have cut back on the use of inputs, while others have given up coffee production.
In some producing areas, crops such as soya, cereals and sugarcane have replaced coffee trees. Moreover, weather conditions were not normal in all coffee producing regions. Past performance figures indicate that, following an abundant crop, recovery is slow and may take a number of years.
World consumption is estimated at 111.7 million bags for calendar year 2003 compared to 109.3 million in 2002. Lower production in Brazil is expected to create a situation in which world production will be below world consumption for the first time since 1997-98.
"The fall in production will impose constraints on the choice between exports, requirements of the domestic industry, and need to maintain an appropriate volume of working stocks," according to ICO executive director.
The possibility of a 10 million bags shortfall, taking into account production and consumption, could be the basis for a new market trend that may imply better incomes for producing countries, it is believed.
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