Coffee Price Swings on Supply Shortages Disruptive, Illy Says

By Rudy Ruitenberg – Feb 9, 2012 9:06 AM GMT-0200

Illycaffe SpA Chief Executive Officer Andrea Illy said coffee-price swings caused by declining stockpiles are “disruptive” to business. Following are comments he made at the “Feeding the World” meeting organized by Economist Conferences in Geneva yesterday.

“The market nowadays is unpredictable. It’s difficult to manage such volatility and it’s quite disruptive. Hedging unfortunately is only short term.”

Price fluctuations are “always triggered by fundamentals, particularly the stock levels,” Illy said. ‘Volatility is very much triggered by stock levels. Even if the production deficit became very clear already in 2009, there was no money in 2009 to speculate.”

“The balance between production and consumption is never perfect. We are in a production deficit, the stocks are very low and as a consequence of this, for the first time in coffee history, it has been more than one year now, the price in New York is systematically above $2 a pound.”

“There are more than 25 million families in the world involved in coffee growing in 50 countries.” The value of the roasted coffee market is estimated at $105 billion, and “only $26 billion right now goes to the growing countries.”

Illy buys coffee directly from Brazilian growers, which allows the company to “source the best beans” as well as trace its products, the CEO said.

“We do serve more or less 6 million cups a day, always with the same blend.”