The Hindu Business Line : Brazil sees 20% drop in 2009-10 coffee production

Kochi, Jan. 18 The Brazilian authorities have estimated a 16-20 per cent drop in its coffee output for the crop year 2009-10, which begins in April. According to the estimate, the production is likely to be 36,897,000 bags against 45,992,000 bags in 2008-09.

“As expected, this level of production, which corresponds to that for the low production year in the biennial cycle, is likely to be between 16 and 20 per cent below the 2008-09 level,” ICO (International Coffee Organization) sources said.

World consumption has been growing steadily since 2000 at an average annual rate above 2.5 per cent. “If this rate of growth continues world consumption could exceed 132 million bags in 2009 and 134 million bags in 2010,” they said.

Price estimates

Bangalore-based coffee growers said the supply in 2008-09 and 2009-10 is expected to fall short of the demand during this period and that will pave the way for a moderately good price for the produce.

Although it is still too early to gauge the effects on consumption of the current financial crisis, early signs give some ground for optimism, they said. Reported sales of food retailers have not shown the decline experienced in turnover of other products, such as clothing and consumer durable goods.

However, according to the ICO, coffee prices continued to fall during December, reinforcing the downward trend recorded since September. This decline is linked more to movements in the exchange rates of the dollar than to market fundamentals. Moreover, it is still too soon to confirm the impact of the current world economic crisis on coffee consumption. Since the balance between supply and demand is relatively stable, the behaviour of prices will depend on the flow of exports in 2009.

Price levels in December confirmed the downward trend recorded in the coffee market since September 2008. The monthly average of the ICO composite indicator price was 103.07 US cents a pound compared to 107.88 US cents a pound in November, a further drop of 4.5 per cent. This fall was most marked in the case of robustas, whereas Colombian milds managed to resist this downward pressure.

The daily weighted average prices on January 13, 2009 were: Other mild arabica (NY) 126.72 cents/pound, while robusta 82.63 cents/pound.

With regard to market fundamentals, this crop year has witnessed increased production in a number of countries — notably Ethiopia, India and Vietnam. The Indian crop is estimated to be lower by 5-6 per cent from the earlier projections due to unfavourable weather conditions, India Coffee Board sources said. Similarly, heavy rains in Colombia and Central America are reported to have reduced the production potential of this area, which may lower the world output to 129-131 million bags from the estimated 134.2 million bags for the current crop year.

Exports by all exporting countries in November totalled 7.1 million bags, bringing the total for January-November 2008 to 87.7 million bags compared with 88.9 million bags for the same period of the previous year, a fall of 1.3 per cent.

Indian exports from January 1 to 14, 2009 dropped to 3,142 tonnes (including 93 tonnes of re-exports) as against 3,985 tonnes (including 738 tonnes of re-export) in the corresponding period last year.

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