Oil prices fuels coffee sustainability concerns

By Neil Merrett

- Last updated on GMT

High oil prices are set to exacerbate coffee supply
concerns by deterring growers from using fertilizers in
cultivating the crop, according to new figures from the
International Coffee Organisation (ICO).

The body said that composite price for the bean had continued to rise on the growth seen in January by 13.5 per cent to $1.32 per pound (lb) due to a steep increase in the cost of fertilizers used in cultivating the crop and increasing demand for the product. The growing expense of acquiring oil-based products, like phosphate, potash and urea, which are often used in coffee growing,​ is already raising concerns over sustainable coffee production, according to the ICO. "One of the consequences of this is that coffee farmers are cutting down on their use of these inputs, which are needed to compensate for the poor quality of soils, particularly in Africa, where soil impoverishment is already affecting productivity,"​ the group stated. ​With a growing number of processors including Kraft Foods and Procter & Gamble having to directly pass on strong costs increases for coffee beans onto consumers, the claims highlight further potential difficulties for the industry. Part of the problem according to the ICO is the increasing consumption of coffee, which according to its preliminary findings, last year rose by about 7 million bags since 2005, amounting to 123 million bags of the product worldwide. ​At the same time, the ICO said that the volume of exports over the first four months of the 2007 to 2008 coffee year reached amounted to 29.1 million bags from October to January, down by 8.1 per cent over the same period last year. The ICO's indicator price for the Robusta variety of coffee bean for February was recorded a 13 year high, with increased price volatility for Arabica beans also expected on the coffee futures market. Composite price​ 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.

Related topics: Tea and Coffee, Markets, Sustainability

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