Lower Brazil crop could revive coffee prices

Coffee prices are expected to pick up after sliding for the last few years, thanks to the anticipated fall in Brazil output next year.

The projected fall in the Brazilian crop is anticipated to pave the way for relative balance in supply and demand, leading to "satisfactory price levels."

Speaking at the 20th International Conference on Coffee Science, also known as Association Scientifique Internationale du Cafe or ASIC 2004, on Monday, Nestor Osario, executive director, ICO, said the Brazilian crop was seen falling.

Brazilian production had originally been estimated at 38 million bags of 60kg each for the 2004-05 coffee year starting October. Actual Brazilian production may be only 34 million bags.

"Thus, I see the possibility of a more balanced equilibrium between global supply and demand, provided the carry-over stock position does not change significantly," Osorio said.

This should come as a major relief to Indian coffee growers as coffee prices are currently ruling at 30-year lows and the global demand has remained stagnant despite ups and downs in production.

Osorio admitted coffee growers had been passing through a crisis over the last few years, with price realisations falling below production costs for several grades.

For instance, the ICO Composite Indicator Price had slumped from $1.20 a pound-weight during the 1980s and 1990s. It had, at one stage, dropped to below 50 cents, he said.

Prices crashed because production exceeded consumption. He said next year, global consumption was estimated at 110-115 million bags, up only 1.5 per cent, but it would still be lower than production.

To address this, coffee growing nations should shed the mindset of branding coffee as an export commodity. The focus should now be on ways to boost domestic consumption, encouraging crop diversification among growers and promoting campaigns to increase coffee drinking.

Producing countries could learn from Brazil , which had upped domestic consumption from 8m to 15m bags, he said.

Dr M S Swaminathan, chairman of the National Commission on Farmers and the M S Swaminathan Research Foundation, in his keynote address, said farmers should be protected from price fluctuation. Self-help groups could promote joint development, reduce costs and share risks better.

Lakshmi Venkatachalam, chairperson of the Coffee Board, said the board was in the process of branding coffee according to the regions in which the bean was grown . Besides, the board would be working on crop diversification and agronomic packages for coffee growing areas.