The world coffee market will witness nervousness and uncertainty in forthcoming months following tight supplies of Mild Arabicas from Colombia and expected decline in coffee exports from Brazil, the world?s top coffee producing country, according to the International Coffee Organisation (ICO). Brazil coffee exports are expected to fall because of drop in output in 2009-10 than the previous year. The problems may further aggravate as production fall is also expected in India and Peru, the ICO has said.
Following shortfall in Colombian production, prices of Colombian Milds recorded its highest monthly average in April since February 1998.
In fact, the industry has struggled to cope with a deficit of around 2.5 million bags from Colombia, where the production is being affected by the ongoing government programme to replace old coffee trees.
?The difference between the Colombian milds indicator price and the New York futures market has increased from 9.88 cents to 62.62 cents per lb since October 2008. The soaring prices of Colombian milds that continued during the first week of May have had a ratchet effect on prices of the other groups of coffee with the exception of Robustas,? ICO executive director Nestor Osorio said in his latest statement.
The monthly average of the ICO composite indicator price was up from 105.87 cents per lb in March to 111.61 cents in April.
?The reduction in Colombian production does not in itself seem sufficient to explain the current price rises. It should be noted that attempts to find supplies of other milds to offset the relative shortage of Colombian coffee are being hampered by limited export availability from central America, which is attributable not only to climatic problems but also to high costs of labour and fertilisers,? Osorio said.
However, problems in the availability of Mild Arabicas supplies have continued to support firm prices in the market as a whole while leading to very high levels of differentials for Colombian and other milds.
However, increases in exports from certain producing countries have enabled importers to cover their needs. The tight supplies of Mild Arabicas are likely to persist until the situation in Colombia returns to normalcy, which is expected only after October 2009, Osorio said.
In the next crop year 2009-10, production in Brazil is expected to fall as this will be the off-year in the biennial production cycle. The Brazilian authorities forecast a crop of 36.9-38.8 million bags.
Similar cyclical reduction is expected in Peru, a significant supplier of washed Arabica. The forecast for the current crop year that would end by September 2009 in India is also not encouraging. According to the revised post monsoon forecast by the state-owned Coffee Board, India would produce around 262,300 tonne, down by 30,700 tonne from post blossom estimates that stood at 293,000 tonne.