[Benjamin]

‘Coffee price threatened by surging output’
Feb 17

Coffee’s 42% gain during the past year may be difficult to sustain as production threatens to exceed demand , said Nestor Osorio, executive director of the International Coffee Organization.

“This is not the moment to increase production,” Mr Osorio said in an interview today at the Eastern African Fine Coffee Association conference in Arusha, Tanzania. “If production is controlled, we could keep the same level of prices.” African growers such as Angola, once the world’s fourth-biggest producer, and Tanzania want to increase harvests. Angola lost market share during the past two decades as wars and rising energy costs hurt harvests. Africa’s share of global production fell to 12% last year from 29% in 1986.

Robusta coffee for delivery in May rose $28 a metric tonne, or 2.4%, to $1,213 on London’s Liffe exchange at 11:14 AM local time. Arabica for May delivery dropped 1.9% to $1.086 a pound on the New York Board of Trade yesterday. “We are now getting at a difficult level in the sustainability of price,” Mr Osorio said yesterday.

Angola plans to boost output 40-fold over an unspecified period as it strives to recover from a 27-year civil war that ended in 2002, officials said at a March conference. In 1975, the year the war started, the southwest African country produced 1.06 million bags of coffee, compared with 1,955 bags last year, according to ICO data. Tanzania, Africa’s fourth-biggest producer, announced plans yesterday to increase output by 84% by 2008 to 70,000 metric tons, which equates to 1.17 million bags.

The London-based ICO said on January 16 that coffee production in the 2006-07 season will be between 120 million and 122 million 60-kilogram bags compared with consumption of 118.7 million bags. That contrasts with the organisation’s forecast for demand to exceed supply by 7.2 million bags in 2005-06. Robusta, a bitter tasting variety used mainly in instant coffee, gained in 2005 for a second year, reversing a decline in 2003. The price has fallen in six of the past 10 years, declining to as low as $345 a tonne in 2001. Arabica, a milder, more expensive variety, rose every year between 2002 and 2005 after slumping to as low as 42.2 cents a pound in 2001. The current prices shouldn’t tempt producers into increasing production, Mr Osorio added.

Rising oil prices and a weakening dollar are pushing up costs for growers, Mr Osorio said. Brent crude has climbed 29% during the past year.
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Coffee bounces back
February 18, 2006

Coffee futures have come back to life after months in wilderness, and are showing good enough volumes across the various exchanges.

With new warehouses being opened and Ncdex also showing interest coffee is in for good time. In fact the prices have been falling through out last week, and the prices can only recover from here and recorded gains of nearly Rs 200 on Friday. Asian coffee prices were mostly lower in the week till Friday, weighed down by another week of losses on futures exchanges that kept most sellers out of the market in hoping that prices would rebound. Thursday, the March robusta contract on the London International Financial Futures and Options Exchange ended $28 lower at $1,163 a metric tonne, down $43 from a week ago. The May contract also settled $28 lower, at $1,185/ tonne, down $40 from a week ago.
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Monday, February 20

With a drop in production expected across the major producing countries coffee is in for some good times not only in India but also across the globe. After a 7% loss during the week prices showed signs of recovery. Arabica coffee futures sprinted off seven-week lows on Friday on the New York Board of Trade as funds, small speculators and locals bought in May and later months.

The March notice period began and recent pressure from funds liquidating March longs subsided, allowing the market to turn higher.

The March contracts closed up 345 points at $1.0945 a pound, and May gained 295 points to $1.1155. Brazil's 2006-07-coffee crop suddenly looks at least 2 million 60-kilogram bags smaller because of dryness and fungus problems.