Slide in coffee stocks may continue: ICO
Coffee stocks, already at the lowest levels since the International Coffee Organization began keeping records in 1965, may fall further, ICO Chief Economist Denis Seudieu said on Tuesday.
"The next year the opening stocks may go down unless we have very huge production somewhere," he told the Reuters Global Food and Agriculture Summit, noting high prices meant farmers were keen to sell coffee rather than rebuild stocks.
The ICO earlier this month estimated opening stocks in exporting countries at the start of the 2010/11 crop year were just 13.0 million (60-kg) bags, down from 20.5 million at the start of the prior season and 55.1 million a decade earlier.
"Exporters are using even part of their working stock to continue to maintain a fair flow of coffee," Seudieu said.
He noted the market had comfortably absorbed a large Brazilian crop last year of about 48.1 million bags while 2011 will be an off-year in the biennial crop cycle.
Brazil's crop supply agency Conab estimated in January the forthcoming 2011 harvest at 41.9-44.7 million 60-kg bags.
"This year Brazil has produced a huge volume of coffee but this hasn't impacted negatively the price. Next year will be an off-year," he said.
Arabica coffee futures on ICE rose to the highest level in 34 years earlier this month with the second month peaking at almost $3.00 per lb.
The market has since suffered a retracement, linked partly to a broad-based setback in commodity markets following the catastrophic earthquake and tsunami in Japan.
"I think there will be some downward correction but the main trend will be around $3.00 (per lb) for arabica," he said.
Seudieu said the tightness in the coffee market was partly due to lower production in some key exporting countries, particularly Colombia.
Colombia has seen production fall as a result of adverse weather and a program to replace old trees. It takes around three years for new trees to be productive.
Colombia's coffee production this year is expected to reach at least 9 million 60-kg bags, the highest level since 2008, as better weather helps flowering, the country's coffee federation said in late February.
"In two years time, if they don't have any adverse weather, they (Colombia) may get back to their previous level which was around 11 million bags," Seudieu said.
"In three or four years time, I think Colombian production will pick up," Seudieu adding, noting Colombia was planning to get to around 15 million bags.
[Source: By Nigel Hunt, Reuters, London, 15Mar11]
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