Plentiful nearby supplies continued to weigh on global coffee prices which made little headway during the period under review. The ICO composite indicator price fell from 106.19 to 105.97 cents/lb, while Colombian mild arabicas (daily weighted average) gave up 55 points to close at 126.10 cents. Other mild arabicas fell from 124.79 to 124.63 cents. Brazilian natural arabicas lost 1.71 cents to close at 111.78 cents, while robustas gained 1.12 cents to settle at 80.14 cents.

The weight of the large Vietnamese 2006/07 crop has not been felt by the market and robusta prices have held firmer than arabica values in recent weeks. Strong purchase interest in Vietnamese robustas for second half 2007 shipment met a lack of selling interest because of London's backwardation. The inverse structure of market prices is currently inducing local exporters to ship record volumes of coffee overseas with the General Statistics Office recently reporting January exports at an all time high of 150,000 tonnes, nearly double the 81,000 tonnes shipped the same month last year. That brought total exports in the first four months of 2006/07 (October/September) to 374,000 tonnes, up sharply from 282,000 tonnes exported the same period in 2005/06.

Vietnam harvested between 15 and 16 mln 60-kg bags of coffee in the recently concluded 2006/07 harvest, up sharply from the official figure of 13.2 mln the previous season. Growers said that they have sold between half and two thirds of their harvest to domestic buying agents who mostly retain the beans for speculation. Sales are expected to pick up in February before the Tet Lunar New Year festival in midFebruary as farmers need cash for their expenses.

Activity in Brazil's cash coffee market has slowed recently as the fall of NYBOT futures has widened the gap between prices producers are asking for and buyers are willing to pay. While longer-term fundamentals remain bullish, ample spot supplies provide buyers with a comfortable feeling. On the other hand, Brazilian producers are unwilling to compromise on differentials as the picture of the country's 2007/ 08 harvest is still very unclear. Conflicting reports came out of Brazil, which has been pounded by heavy summer rains in December and January. Producers in the country's NO.1 growing state of Minas Gerais voiced concern that the rains are causing coffee rust throughout the state though they were not able to provide an estimate of the extent of damage to the 2007/08 crop. Meanwhile, agronomists said that the rains bode well for the next crop, still over a year away from harvest, because it leads to new branch growth. More branches mean more flowering opportunities, they added. Last year at this time it was completely dry which hu rt tree development.

For the following season, coffee trees have to get through the Brazilian winter months of June to August, then through the flowering season of September and December, before farmers have any real notion of what is in store for 2008/09.

As anticpated, Brazilian coffee exports show signs of slowing down judging by preliminary figures released by the Brazilian Green Coffee exporters Council (Cecafe). Green coffee exports in January 2007 are estimated at just under 2 mln bags compared to 2.2 mln in December. Dollar weakness is a disincentive for Brazil to sell with gains in the futures market offset by adverse currency fluctuations. Industry observers said that coffee production will have to grow as global demand for Brazilian coffee is strong and is now also competing with keen domestic demand. This rose by 5.1 % in 2006 to 16.3 mln bags, the Brazilian Coffee Industry Association (Abic) said. Brazil is aiming to raise consumption to 21 mln bags in 2010 and overtake the US. That nearby supplies are plentiful was underlined by the latest export figures released by the International Coffee Organisation (ICO).

Members exported 8.40 mln 60-kg bags of coffee in December 2006, up by 16.4% from 7.21 mln exported the same month in 2005. That brought total exports in first three months of 2006/07 (October/ September) to 23.381 mln bags, 19.5% more than the 19.568 mln exported the same period in 2005/06. The rise in exports of Brazilian naturals was the strongest with 28.14%. But robusta shipments also increased by 19.55% to 7.978 mln bags.

The number of bags pending grading at NYBOT remains fairly large at around 128,000 bags and there have been consistent stock increases. However, inventories rose mainly in the European ports whereas certified coffee stocks in the three major US ports have continued to decline and are at multi-year lows, J. Gains Consulting, LLC said.

Despite abundant nearby supplies, there is a consistent stream of warnings of tight supplies during the second half of 2007. The ICO said that production prospects for 2007/08 could be trimmed in the months ahead due to the possible negative impact of EI Nino. It indicated that global production could be between 109-112 mln bags next season, compared to global use of between 118-120 min. The lCD's Executive Director, Nestor Osorio, repeated warnings that Brazil's coffee stocks are "worrying low" at around 10 mln bags. The Brazilian Coffee Roasters Association (ABIC) recently said that Brazilian supplies could face a deficit in April. It was added that supplies should be tightest around December 2007 and January 2008, due to rising internal demand and lower production. However, much will depend on Brazilian output in 2007/08 with buyers not overly nervous at present.

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