Robusta prices hit 12-year high

Reason: Farmers in Vietnam, the largest producer, are resorting to hoarding.

Robusta prices have hit the 12-year high as farmers in Vietnam, the largest producer, are hoarding crops.

Speculators active in the market are further pushing up the prices.

International Coffee Organisation (ICO) Executive Director Nester Osorio, in his latest Coffee Market Report, said, "The current supply and demand situation is underpinning the firmness in prices, making it likely that the present trend will prevail."

The increase in prices have generated speculative activities, particularly on the part of investment funds, which took significant long positions on futures markets, leading to a supply shortage mainly in the case of Robustas.

The upward trend in coffee prices continued in January 2008, with the monthly average of the ICO composite indicator price at 122.33 cents a pound compared with 105.81 cents in January 2007.

The increase was significant in the case of Robustas, with the monthly average at 99.71 cents in January 2008 compared with 91.39 cents in December 2007. On January 31, the daily average of Robusta reached 104.09 cents, the highest in 12 years. Arabica prices are at their highest level in 10 years.

"The behaviour of the market at the beginning of February indicates a continuation of the upward trend in prices for all four groups of coffee, as the ICO composite indicator price recorded on February 8 was 133.19 cents," said Osorio.

In December 2007, the country exported 7.6 million bags, taking the total for the year to 95.5 million bags, an increase of 3.7 per cent over last year.

However, exports for the first quarter of coffee year 2007-08 (October "� December) totalled 22 million bags, indicating a slight slackening in comparison with the same period a year ago (23.5 million bags).

Osorio said, "Notwithstanding the upward trend, the appreciation of the national currencies of a number of exporting countries in relation to the US dollar increased the cost of inputs. Moreover, the social and political difficulties in Kenya seem to be having repercussions not only on the activities of the coffee chain in this country but also in Uganda, whose exports via the Kenyan port of Mombasa have virtually grounded to a halt since December 2007."