Coffee prices set to fall further

A record off-year coffee crop in Brazil and bumper crops in Colombia and Vietnam have impacted global prices negatively

Coffee prices, which were at a four-year low earlier this week, are likely to dip another 10 per cent in the next couple of months, with massive supplies from Brazil, Colombia and Vietnam negatively impacting the markets.

Abundance of beans in the world market has continued to put pressure on prices. The ICE Arabica coffee futures for December delivery settled at $1.1270 a pound, the lowest settlement for the most-actively traded contract since March 17,  2009. According to the Coffee Board of India, LIFFE Robusta coffee futures for November delivery settled at $1,602 a tonne, down $29.

Arabica prices are likely to stay in the range of 100-120 cents in the short-term period up to December, said Ramesh Rajah, president, Coffee Exporters’ Association. “Last year, around this time of the year (October), Arabica was traded at 160 cents per lb (pound) and Robusta was above $2,000 per tonne. The drop in demand from major European buyers and huge crop in top three producers such as Brazil, Colombia and Vietnam has resulted in the drop in prices,” said Rajah.

Forecast for an improved crop in Colombia and big crop being harvested in Vietnam next month has spread negative sentiment in the markets. Already, Brazil has harvested a record “off-year” crop and is headed for another bumper crop for next year. Robusta prices might settle down by 10 per cent lower on the present levels of $1,633 a tonne.

“Roasters shifted to Robusta coffee as it was cheaper in the recent months. They are now looking back at Arabica, as it is cheaper due to huge crop in Brazil. The Arabica terminal is facing pressure,” said Damodar Kamath, managing partner, Bola Surendra Kamath & Sons.

Good rains across growing regions in Brazil, the largest producer of coffee in the world, has also created a negative sentiment in the markets as it would result good flowering for the next crop, traders said.

“Two years ago, Arabica was traded at 300 cents per lb and Robusta was traded at $2,700-2,800 per tonne. The continued slowdown in demand from the major buying nations in Europe has resulted in the decline in prices and there is not much hope for revival in prices,” said Kamath.

The harvesting of Indian crop will begin my mid-November. The crop is said to be at least 10-15 per cent lower than the Coffee Board’s initial estimates. The board, in its post-blossom estimates, had pegged the production for this year at a record 347,000 tonnes. However, due to heavy monsoon rains in June, July and August, the crop is likely to be lower than the estimates.

The Indian exporters have begun the new crop year (October-September) with a record carry over stock of 30,000 tonnes. “Usually, the carryover stocks are in the range of 10,000 tonnes. This year, the exporters are sitting over record stocks and any drop in the new crop will be offset by carryover stocks,” said Rajah.