World coffee prices may recover because of a smaller crop next year in Brazil, the world’s biggest producer, said Nestor Osorio, Executive Director of the International Coffee Organization (ICO).
There are “reasons to believe” in a price rally because the “pattern is for a reduction of 15-20 per cent” in the Brazilian harvest in 2009 as it enters the low production phase of its two-year cycle, Osorio said in an interview at a conference in Ho Chi Minh City.
Prices of the mild-tasting arabica coffee used by Starbucks Corp fell to their lowest in two years in New York on Friday, dropping with other commodities, after a report showed US employers cut jobs at the fastest pace in 34 years. Prices of the bitter-tasting robusta used in espresso and instant coffee by Nestle SA have slumped 32 per cent since the end of June.
The Brazilian crop may be about 40 million bags next year, “a very tight figure” considering that the country is exporting 27-29 million bags and “they are consuming now 18 million bags,” said Osorio, who was in Brazil two weeks ago.
“We foresee a consumption of around 130 million bags and production that could be around 125 million bags in 2009-10,” he said, referring to world supply and demand. The ICO estimates use at around 128 million bags in 2008 and production at 132.5 million bags in 2008-09. Each bag weighs 60 kg (132 pounds).
Demand growth
Global coffee consumption has been growing at 2 per cent a year fueled by domestic use in producing nations, Osorio told the conference later, and meeting this consistent growth in demand was “a challenge.”
Still, Eric Nadelberg, senior vice-president of investments at Prudential Bache Commodities, was not as optimistic as Osorio. “Consumption will flatten over the next couple of years,” Nadelberg said at the conference. “Prices will come under pressure, as consumption comes under pressure.”
Information from exporting countries shows opening stockpiles for the crop year 2008-09 were just 17 million bags, down from 25.4 million a year earlier, Osorio said in the organization’s November report.
