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Coffee prices on the increase as shortage bites

By Anthony Fletcher , 24-Aug-2006

The price of coffee has risen, and is expected to continue to rise, as a result of a shortage on the world market.

According to the International Coffee Organisation's market report, the sector recorded an upward trend in prices in July, which became more pronounced in the first week of August when the New York and London futures markets recorded significant rises.

" More specifically, Robusta prices have been rising sharply since the end of July," said Nestor Osorio, executive director of the ICO.

 

"On 2 August the Robusta indicator passed the 70 US cents/lb mark, reaching its highest level since 8 December 1999."

 

All four groups of coffee - Robustas, Columbian Milds, Other Milds and Brazilian Naturals - recorded price increases compared to June.

 

"This firmness in prices was more marked in the case of Robustas, which moved upwards significantly in the first week of August, " said Osorio. "This seems to indicate a relative shortage in the supplies of this type of coffee, particularly from Vietnam and Indonesia, which are together with Brazil the main producers."

 

Exports during June 2006 totalled 7.65 million bags, representing a fall of 7.23 per cent compared to the level of 8.16 million bags in May. Cumulative exports for the first nine months of the coffee year (October 2005 June 2006) fell by 8.52 per cent compared to the figure for the same period in coffee year 2004/05, totalling 63.11 million bags compared to 68.99 million bags.

 

Stock levels have also fallen in importing countries. Stocks of green coffee, including free ports, are estimated at around 19 million bags. The level of certified stocks in the London futures market (LIFFE) fell while that in the New York futures market (NYBOT) rose slightly at the end of July compared to the level at the end of June.

 

These levels are still below those recorded in 2005.

 

In most exporting countries crop year 2006/07 will begin in two months time. In other exporting countries, however, the crop year has already begun, either in April 2006 or in July 2006.

 

"On the basis of the available information, my estimate of total production in crop year 2006/07 remains unchanged in relation to the level of 120 million bags indicated in my previous report (June 2006)," said Osorio.

 

An increase in Vietnamese production is anticipated in crop year 2006/07 while Indonesian production has fallen. The latest estimates from Brazil, which has already harvested half of its 2006/07 crop, have been established at around 40.62 million bags.

 

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