Tight global supply and emerging fesh demand for coffee will be the key factors that will help keep international prices firm for the remainder of the year, analysts and traders said.

World supplies are tight since, Brazil, the world's leading producer of coffee, is expected to see a drop in its output in 2007-08 (October­September) to around 31.7 million bags (1 bag=60 kg) compared with a production of 42.5 million bages in 2006-07, according to the International Coffee Organisation (ICO).

Brazil accounts for one third of the world's total coffee production and is predominantly into a arabica coffee.

"As Brazil is picking a much smaller crop, global prices should remain firm and not see a down­trend," said Anil Kumar Bhandari, former chairman, United Planter's Association of Southern India.

Vietnam, one of the leading robusta coffee producer, also harvested a much smaller crop for the harvest season that ended in June.

Overall, the world supply of coffee, both arabica as well as robusta, is seen tight as the worlds leading producers are likely to harvest a smaller crop in 2007-08, thereby keeping prices in positive territory. Global coffee output in 2007-08 is seen falling to 112 million bags form 121 million bags in the current year, the International Coffee Organisation said.

Based on the Brazilian crop situation and low carryover stocks with exporting countries supply in 2007-08 will fall short by 6-8 million bags, the London-head quartered body of coffee experts said.

Opening stocks in exporting countries like Columbia Brazil, and Indonesia, among others, have declined due to a rise in exports said.

Opening stocks in Brazil, provides the largest volume has fallen 23.5 per cent for 2007-08, ICO said.

Vietnam's output also fell 5 per cent to 17.7 million bags in 2007-08. This will mean lower exports from that country.

However, Columbia, the other major arabica coffee producer, is likely to harvest 12.4 million bags, up by 200,000 bags from last year. Harvest in Indonesia is currently on.

Also, the proliferation of coffee joints worldwide has spurred demand, keeping prices supported at the upside, said Gunasekar Thiagarajan, director, Commtrendz Research.

Between arabica and robusta coffee, demand for the latter is on the rise, said Chowda Reddy, assistant manager, Karvy Comtrade.

Apart from strong physical demands for the commodity, investment interests in soft commodities will keep prices in the upward trajectory, analysts said.

Globally, coffee is the second largest traded commodity after crude oil.

"Soft commodities are over all on the bull run and the ruboff effect is on coffee". Thiagarajan said.

The trend remains bullish and robusta coffee futures for September delivery on the London International Financial Futures Exchanges (LIFFE) could touch $ 2,040 a tonne, Reddy said.

In the next two three weeks, the contract may find its first support at $1,840 a tonne followed by $1,790 Reddy said.

On Tuseday, the contract ended at $1,887 per a tonne.

September delivery on the LIFFE may face resistance at $1,925 a tonne and then at $1,945.

"We recommend buying at $1,800 levels," Reddy said.

Arabica futures on the New York Board of Trade (NYBOT) for September delivery may find initial support at $1.10 a pound and then at $1.08.

It may face resistance first at $1.135 a pound and then at $1.165, Reddy said. The contract ended at $1.111 a pound.

Analysts maintained that the overall trend is bullish but the upward movement could be interspersed by corrections.

The underlying trend is bullish but there could be some small and big corrections. Thiagarajan said. "At present, prices are largely stable. We are yet to see a marked increase in price. But there will not be any major downturns in prices this year barring a few corrections," Bhandari said.

Fund selling on te~hnicals may see occasional price corrections on the LIFFE and the NYBOT, analysts said.

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