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Coffee costs soar into 2008

By Neil Merrett , 16-Jan-2008

Coffee prices continued to rise into 2008 on the back of increased costs at the end of 2007, according to new figures from the International Coffee Organisation (ICO).

The cost of coffee rose extremely sharply in December 2007, particularly for the Arabica variety, with the monthly average ICO composite price up by about three per cent to $1.18 per lb over November, according to the ICO's World Market Report. A spokesperson for the ICO told BeverageDaily.com that the current trend reflected the generally buoyant coffee market and, with no clear changes in supply or demand yet anticipated, could well continue during part of 2008. The news may mean further commodity hikes for coffee processors amidst growing demand for the product and an estimated decline in output during the latest crop year. The cost of Arabica alone rose by about five per cent during the month, though the ICO said that prices for the Robusta bean were down slightly over the same period, despite generally holding firm during December.


However, by 11 January, Robusta prices rose above the $1.00 per lb barrier for the first time in twelve years, charting an overall increase in costs of 363 per cent from January 2001, when the same product cost $0.21 per lb. Despite the sharp price rises in recent years, the organisation said that the weak US dollar was hitting exporter earnings hard. Market factors While the ICO stressed in the report that the 2007 to 2008 crop year remained under way in the majority of key exporting nations, total production was estimated to be down by about 7.4 per cent to 116m bags over the previous year.


By contrast, cumulative coffee exports appeared to be up for the twelve months between December 2006 and November 2007 to 95.8m bags from 90.9m bags over the same period during the previous year. The ICO composite price takes into account a number of factors, when assessing the cumulative value of coffee, according to the organization.


These factors are based on the findings of ICO agents in the three main markets of the US, France and Germany. The importance of these markets to the total price is based on the average export performance of the US and EU markets between 1996 to 1998 and is reviewed every two years.

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