ICO forecasts sustained strong coffee prices

By staff reporter

- Last updated on GMT

The recovery in coffee prices recorded in November 2006 became more
pronounced in December, according to ICO executive director Nester
Osorio.

The monthly average of the ICO (International Coffee Organisation) composite indicator price reached a level of 108.01 US cents/lb, the highest since June 1998.

"The increase was significant in the case of Arabicas; the New York futures market(NYBOT), which is sensitive to the situation of Arabica supplies, recorded its highest price level in the last 20 months,"​ explained Osorio.

"This firm price trend continued in the first week of January 2007."

Prices for Robustas remained relatively stable in relation to their November levels.

And although it is difficult to give precise figures to estimate at this stage the volume of world coffee production, Osorio said that it was nonetheless clear that there would be a deficit in production vis-a-vis current demand.

"My first estimate of world production for 2007/08 is of a range between 109 and 112 million bags compared with total demand at around 118 to 120 million bags,"​ he said.

"Although crop year 2006/07 is still under way in many exporting countries, our figures indicate a total production of 122.27 million bags, an increase of 11.65 per cent compared to total production in crop year 2005/06.

"However, increased production in crop year 2006/07 will not be sufficient to rebuild stocks in exporting countries if their exports in 2007 remain at the same level as in 2006."

In fact, as indicated in Osorio's November 2006 report, the first estimates of Brazil's coffee production for crop year 2007/08 indicated a figure of between 31.1 and 32.3 million bags. Even if production in other countries were to increase during crop year 2007/08, it would not be sufficient to offset the shortfall in Brazilian production.

A new factor of concern is the possible impact of the climatic phenomenon "El Nino" on coffee production in some coffee regions.

"I will be following this matter very closely in future reports,"​ said Osorio.

World consumption in 2006 is estimated at around 116 million bags compared to 115 million bags in 2005. In 2006 domestic consumption in exporting countries accounted for around 31 million bags and consumption in importing countries accounts for around 85 million.

"In conclusion, I would like to indicate that the current supply and demand structure has reinforced the firmness in prices recorded in December and early 2007, which gives me reason to state that the recovery in prices should be maintained."

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