Larger crop may mean lower prices

IN FOCUS/ COFFEE

Indian coffee growers seem to be in for another year of depressed prices as global coffee prices were likely to stay low in view of a larger-than-expected crop in Brazil, where the July 2004 to June 2005 crop has been revised upwards to 41.20 million 60-kg bags, up 5.6 per cent on a previous forecast of 39 million bags.

The latest figure has been released by the trading firm Unicafe.

As Brazil's top green coffee exporter in April, Unicafe also said it expected the crop to comprise 32.4 million bags of arabicas and 8.8 million bags of conillon (robustas). The trade said the crop would range between 41 and 45 million bags.

The only good news was that overall global coffee stockpiles would fall in the current year.

According to USDA, world 2003-2004 ending coffee stocks would drop to 21.4 million 60-kg. bags, or 19 per cent of annual demand. This was close to the lowest ending stocks-to-use ratios of the past 20 years.

World coffee production was expected to be around 105.3 million 60-kg bags, down from 124.2 million bags in the previous year.

"The fundamental are puzzling - prices were this cheap last in 1992-1993 but then the ending stocks to use ratio was 41 per cent", said a plantation sector expert working at a multinational company here.

International Coffee Organisation (ICO) estimated the 2003-2004 world crop at 101.5 million 60-kg bags, adding that 2003 exports totalled 84.9 million bags, down 2.8 per cent on the year. Even then, the crop would be close to 18 per cent smaller than the 2002-03 crop.

Coffee producers have been hurt by a six-year downtrend with prices close to three-decade lows, said the expert.

Unfortunately, producers have failed to cooperate among themselves. The 45-member ICO agreed to restrain production, but the plan failed.

For example, subsidies paid by Brazil encouraged coffee growers to produce more. The Brazilian harvest has started in May.

Luckily, the increase in Brazilian production will not be sufficient to offset crop shortfalls in other growers. A shortfall of 4 million bags in world production compared to consumption was expected, ICO said.

The other good news for growers was the sustained increase in global consumption, with a 5.2 per cent gain in American consumers in 2003. This was a good sign and has raised hopes of higher retail prices.

Whether this would translate into better prices for growers was however a different matter in view of the many levels of intermediaries between growers and the consumer, he warned.

The coffee areas in Brazil have remained immune from cold spells that have ruined the crop in other years. The Brazilian winter officially starts on June 21. The brazilian weather forecast would determine prices.

As for India, the domestic coffee crop in the October 2004-September 2005 crop year was expected to be 292,400 tonnes, up 8 per cent over the current year, according to Coffee Board sources.

Coffee plantations in Tamil Nadu have enjoyed favourable weather so far and this boosted production.

The crop size in the current year was 270,500 tonnes. The 2004-05 crop would comprise 116,800 tonnes of arabicas and 175,600 tonnes of robustas.

The current year's arabicas crop, which was mostly exported, was approximately 101,950 tonnes, and the robustas crop 168,550 tonnes.

India produced about 4.5 per cent of the world's coffee and exported 70-80 per cent of the crop. The coffee crop size was 275,275 tonnes in 2002-03, and 300,600 tonnes in the preceding year.