Global coffee prices are likely to remain at comfortable level during the year 2011-12 with Brazil, the major producing country, going to have a off-year, a top commerce ministry official said.
“The production of coffee in Brazil is estimated at 47.2 million bags. As such, it is estimated that during 2010-11 there was a surplus of around 5 million bags, which is expected to refill the inventories in importing countries,” Vijaylaxmi Joshi, additional secretary, ministry of commerce said.
Addressing the 53rd annual coffee conference of Karnataka Planters Association and United Planters Association of South India (KPA-Upasi), here on Wednesday, she said the main reason for buoyant prices is attributed to overall tight supply position for the past three years decided by more or less stagnant production and increasing consumption.
For the past three years in a row, the global supply situation remained tight triggering the price boom which reached its peak during early half this year to a 14 year high of $3 per pound in case of Arabic and $2,600 per tonne in case of Robusta.
The prices have since started correction during August and now settled at a favourable level of $2.65 per pound for Arabica and $2,100 per tonne for Robusta. These are almost at the double the levels they were before the present price rally which began in mid-2010, Joshi pointed out.
However, with the rising prices most of the producers worldwide have started taking better care of their crops thereby increasing the chances of increasing overall production by 2012-13. Add to this, the 2012-13 is going to be the on-year for Brazil crop with estimations of all time record crop of 60 million bags (each bag = 60 kgs).
Vietnam is also expected to deliver a bumper crop during the current season with an estimated crop of about 20 million bags.
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Columbia, which is reeling under crop setbacks for the past three years may also recover by next cropping year and produce a high crop. This may bring back the surplus scenario with profound effect on prices, she said.
Jawaid Akhtar, Chairman, Coffee Board said global coffee prices showed a marked downward correction in September 2011, after a great surge in the previous 6-8 months.
“Due to declining stock levels in consuming countries, buoyant world consumption and an off year in Brazil everyone expected the prices to be firm. Many analysts say that the decline is caused by disinvestments in commodities in response to anxieties about the world economy. But the facts remain that to a substantial extent, price fluctuations are not correlated to fundamentals. Too much speculation witnessed in the international market is a cause of worry to all the stakeholders,” he added.
The domestic coffee consumption is showing rapid growth during the past few years with a 5-6 per cent growth rate, breaching the 100,000 tonnes mark during the last year. The prevailing high prices have shown no major impact on the domestic market since most of the growth is happening in the non-traditional coffee drinking areas, where coffee has taken over as lifestyle drink. However, if the uptrend continues for another couple of years, it may dampen the pace of domestic consumption, he said. The world production during the current year (2011-12) is estimated at 129.4 million bags which is a 3 per cent drop over the last year crop of 133.6 million bags. The production in India is likely to see an increase of 7 per cent over the final estimation of 302,000 tonnes of last year.
The post-monsoon estimation of current crop capturing the impact of monsoon rains is under progress. Majority of the coffee growing regions have received well-distributed monsoon rains and hope that this will help in achieving the projected figure of 322,000 tonnes, he added.