Investment funds push coffee prices

Global coffee prices have gone up further during the month of February. The monthly average of the ICO (International Coffee Organization) Composite indicator price is up 13.5 per cent to $138.82 a pound (1 kg is equal to 2.20 pounds) in February as compared with the January's average of $122.33.

In case of Robusta, the indicator price crossed $115, the highest level recorded since August 1995.

Expressing concern, International Coffee Organization (ICO) Executive Director Nester Osorio, said in his latest Coffee Market Report, "Coffee prices have been subjected to substantial volatility in the first few days of March due to active and continuing movement of money from investment funds in the coffee market."

There has been intense activity on both the New York futures market for Arabica and the London futures market for Robusta, which led to increased price volatility on these two exchanges.

"During the first-two months of 2008, the volume of transactions for the first-five positions on the New York futures market was equivalent to 117.4 million bags in January and 202 million bags in February. In 2007, the corresponding figures were 89.7 million bags in January and 129 million bags in February," Osorio said.

The volume of transactions for the first six positions on the London futures market totalled 28.9 million bags in January and 45.1 million bags in February 2008. In 2007, transactions in January totalled 24.3 million bags while the figure for February was 32.1 million bags.

As for the volume of exports, Osorio said, "In January 2008, it is 7.5 million bags, taking the total for the first-four months of coffee year 2007-08 (October 2007 "� January 2008) to 29.1 million bags, a fall of 8.1 per cent compared with 31.7 million bags for the same period in coffee year 2006-07.

"I would like to indicate that the continued consolidation of prices is attributable to a balance between supply and demand on the market that is expected to persist for the remainder of coffee year 2007-08. Investment funds, attracted by the commodity markets, are very active at the moment and could increase price volatility in the short-term, as shown by the behaviour of the market during the early days of March," he added.