Coffee to Remain ‘Very Tight’ as Stockpiles Stay Low

Global coffee supply will likely be “tight” through the remainder of the year as stockpiles held by exporting nations such asColombia stay near a 40-year low, according to the head of the International Coffee Organization.

Stockpiles of the bean are set to hold or rise “a little” from about 13 million bags, the lowest level since the ICObegan keeping records in the 1960s, ICO Executive Director Jose Sette said in a Feb. 11 telephone interview from London. Consumption may rise this year from about 131 million bags in 2010, he said.

“There is simply not enough coffee in the world,” Sette said. There are “very sound fundamental reasons for coffee being high,” he said. Coffee futures rallied 94 percent in the past 12 months in New York, the fourth-best performance among 22 commodities tracked by the Bloomberg CRR Futures List. Prices have surged on speculation supply won’t beenough to meet demand, as countries such as Brazilstruggle to maintain output at last year’s level.
Coffee extended a rally to the highest since June 1997 after his comments. Arabica-coffee futures for May delivery rose 5.35 cents, or 2.1 percent, to $2.6030 a pound on ICE Futures U.S. in New York at 11:40 a.m. Earlier, the price climbed to $2.6085, the highest for a most-active contract since June 1997.

A sustained recovery in production in Colombia will depend on whether rainfall last year damages the mitaca, as the Andean nation’s April-May harvest is known, Sette said. Rising Production There are signs of a recovery. In January, production in Colombia climbed to 908,000 bags in January from 515,000 bags a year earlier. Colombiais the world’s largest producer after Brazil of arabica, used for specialty coffee. “People are worried about the mitaca crop,”Sette said. “We have to wait and see if this recovery will extend” itself. Importers worldwide hold about 20 million bags, orabout three months of consumption, he said.

Inventories in exporting nations have declined to “negligible” levels from between 40 million and 50 million bags a decade ago, Sette said. “It’s what you need to get by –your working stocks,” he said. Output in Indonesia is set to decline this season because of adverse weather, before a likely recovery next season, Sette said. Indonesiais the world’s third-largest coffee producer after Brazil and Vietnam. Missed Forecast In Colombia, last year’s output of 8.9 million bags fell short of the 9.5 million bags forecast by Colombia’s National Federation of Coffee Growers, as above-average rainfall and disease curbed production of arabica beans.

Exports slid in 2010 by 78,000 bags to 7.82 million bags. Coffee growing regions in Colombia’s Andes mountains may have above-average rainfall this month because of the La Nina weather event, and there may be heavier precipitation in the Andes after mid-March, the state-run Institute of Hydrology, Meteorology and Environmental Studies said on Feb. 11.