The Hindu Business Line : Coffee prices show signs of recovery despite slowdown

Even in this scenario, coffee prices have shown signs of recovery after falling below $1/lb in early December, with the ICO composite indicator price standing at 112.02 cents/lb on January 30, compared to an average of 126.69 cents/lb in September 2008, according to ICO sources.

The Indian coffee sector also has not yet felt the pinch of the current economic recession and according to Mr Anil Kumar Bhandari, former President of UPASI, it is “unlikely to make any material difference as only 20-25 per cent of Indian coffee output is consumed in the country”.

Mr Bhandari told Business Line that in-home consumption of coffee is more in India and out-of-home consumption in Café is comparatively much less and, therefore, the total volume sold through this channel is very small.

The likely fall in global output in 2009-10 coupled with the marginal annual growth in consumption, the prices are expected to rule firm this year, he said.

Output

The coffee output is likely to drop by around six per cent from the post blossom estimate for 2008-09 season of 2,93,000 tonnes, he added.

The total Indian exports from January to February 12 dropped by 2,331 tonnes to 19,292 tonnes including 4,546 instant coffee from 21,623 tonnes including 8,095 tonnes of instant.

According to ICO sources, early reports show that food sales are holding up better than those of non-food products.

It seems that big chains are competing by cutting prices rather than losing market share or seeing the volume of sales decrease, even at the expense of profits.

North America, Europe and Japan account for approximately 58 per cent of world consumption.

In coffee producing nations, which account for over 26 per cent of world consumption, the situation is more diverse, he said. In some countries, prices of coffee have fallen in local currency and consumption may, therefore, be stimulated. The Brazilian authorities anticipate a crop of between 36.9 million and 38.8 million bags. The fall in production is linked to the biennial cycle of Arabica production in Brazil, with an abundant crop in one year being followed by a significantly lower crop in the next. Arabica production will be around 26.9 million to 28.3 million bags and production of robustas around 10 million to 10.5 million bags. A similar cyclical reduction in production is expected in Peru, which has become an increasingly important origin of washed Arabica in recent years.

The situation in other countries is somewhat different to that in Brazil and Peru, particularly in countries where the 2008/09 crop year is still under way.

The current crop in Colombia and Central America countries has been affected by excessive rain, which may cause losses of up to 20 per cent in relation to initial production estimates.