Coffee growers look for improvement in prices

Chennai: Despite the plunge in global coffee prices, coffee growers are hoping for an improvement mainly since roasters are on hand-to-mouth existence.

Analysts, despite the fall in prices from around 106 cents a lb levels two weeks ago, are of the view that prices would top 100 cents again given the precarious stock levels. Growers here too are looking for similar rise in farm gate prices.

General trend

“Growers are looking for around Rs 4,000 for a bag of 50-kg for arabica parchment against the current level. Similarly for robusta cherry, they are looking for prices around 1,350-1,400 for a bag,” said Bose Mandanna, former vice-president of the Coffee Board. |MFs too bear the brunt|

The fall in coffee prices in the last fornight has been in line with a general fall in commodity prices. According to analysts, Brazil is having its lowest carryover stocks in years and that itself should lendsome stability to coffee prices.

During the weekend, benchmark July futures in New York for arabica slid to 98.10 cents. In London, robusta for July delivery was quoted $1,125 a tonne.

No frost effect

“Prices have been ruling better during the last few months. Until two weeks ago, arabica prices in New York were hovering between 108 and 110 cents a pound. Reports of Brazil being unlikely to be hit by frost have also affected the sentiment. However, we expect prices to gather momentum,” an analyst said.

Currently, arabica parchment farm gate prices are ruling at Rs 3,650-3,700 for a 50-kg bag, while robusta cherry is quoted at Rs 1,275-1,315. This is far cry from the Rs 4,600 a bag witnessed for arabica parchment and Rs 1,600 for robusta cherry.

Tight supplies seen

“Prices are down from the peak witnessed in January-end. But the trade sees the situation improving in a couple of months when buyers enter market and western winter approaches,” the analysts said.

According to Anil K. Bhandari, the shortage of coffee, including robusta, could be felt acutely in the near-term and prices could resume their movement.

“We definitely see supply problems in the near future,” he said. “We are witnessing a fair demand for exports. Prices are definitely better than what it was a couple of years ago,” said Bhandari.

More export permits

According to the Coffee Board, it has issued permits to export 98,827 tonnes until May 26. This is against permits issued for shipments of 89,627 tonnes during the same period a year ago.

So far, exporters have produced proof of exporting 74,328 tonnes of coffee this year (85,198 tonnes a year ago).

The International Coffee Organisation expects global production in the 2006/07 season to reach 120 million 60-kg bags, up from about 107 million bags the previous season.

Carryover stocks

However, the carryover stocks are low with world consumption forecast between 118 and 123 million bags.

Brazilian coffee officials have put the 2006/07 (July/June) crop at 40.62 million 60-kg bags, up 23 per cent from the previous season. | Go to Sify Business Home page |

But it is still lower than the initial estimates of 42-44 million bags and experts see it as just enough to meet its export commitments and domestic demand.

Vietnam’s crop, on the other hand, is expected to be 11 million 60-kg bags against initial estimates of 13 million bags.

On the other hand, Indian production could be marginally higher this season at 2.82 lakh tonnes from 2.75 lakh tonnes