Anticipated higher output in Brazil is expected to push up the world coffee production to 127 million bags (60-kg per bag) in the crop year 2008-09 from around 117 million bags a year ago, according to a revised estimation by the International Coffee Organisation (ICO).
However major exporting countries, including India, need not panic as the higher production was not likely to drag down the prices as demand for the commodity also has been increasing on par with the production.
Earlier ICO had estimated that production in the current crop year would record in the range of 123-126 million bags. ICO?s upward revision comes after CONAB, the official agency responsible for agricultural estimates in Brazil, released a positive outlook on the local coffee production this year. Brazil is the word?s largest coffee producer and exporter.
In accordance with the biennial cycle, Arabica production will be bumper this year in Brazil. CONAB estimated that Brazil will harvest 45.5 million bags of coffee beans in the 2008-09 crop year, raising its estimate from an earlier range of 41 million to 44 million bags. The projected crop in Brazil would comprise 34.7 million bags of Arabica and 10.8 million bags of Robusta. Brazilian production in the current crop year will be 35% higher than the previous year that witnessed low production season for Arabica.
Despite higher production, farmers in growing countries like India will continue to get premium prices as the coffee consumption also has grown up in the last five years, trade sources said. Looking at the healthy growth of 2% in the past few years, ICO said coffee consumption could increase to 125 million bags in 2008 and touch 127 million bags in 2009.
ICO executive director Nestor Osario, in his statement released on Tuesday said, ?Despite an increase in supply, coffee prices remain relatively firm on account of growing demand. Imports reached a record level in 2007. Demand is thus the main factor influencing market development at present.?
He also said that in view of the weakness of the US dollar and the continued increase in prices of oil products, some exporting countries have introduced compensatory mechanisms designed to support coffee producers. Specifically, the Brazilian government has decided to provide support prices for producers through auction sales covering maximum volume of 4-million bags in the form of option sale contracts. Colombia has also announced a support programme that will provide growers with fertilizers equivalent to 24% of their annual fertilizer costs.
