After Period of Gains, Coffee Prices to Stabilize

International coffee prices are due to stabilize for the rest of this year and 2012, according to the Brazilian Ministry of Commerce, representing one of the world’s major suppliers of coffee.

At the 53rd annual coffee conference of Karnataka Planters Association and United Planters Association of South India (KPA-Upasi), Vijaylaxmi Joshi, Brazil’s secretary, ministry of commerce said “the production of coffee in Brazil is estimated at 47.2 million bags. As such, it is estimated that during 2010-11 there was a surplus of around 5 million bags, which is expected to refill the inventories in importing countries.” 

The last three years experienced an extremely limited supply of coffee, which was contributed by high demand, poor weather conditions, and sluggish production levels. 

This resulted in record price hikes. For instance, Arabica coffee, which is preferred by coffee houses such as Starbucks Corp., reached $3 per pound. Whereas Robusta, typically grown in Asia and parts of Africa, which is a less valued type of coffee and frequently used in instant coffees and espresso beverages, cost $2,600 per metric ton. 

The Chairman of the Coffee Board Jawaid Akhtar said that global coffee prices began to slow down after September 2011.

“Due to declining stock levels in consuming countries, buoyant world consumption and an off year in Brazil everyone expected the prices to be firm,” he said. “Many analysts say that the decline is caused by disinvestments in commodities in response to anxieties about the world economy. But the facts remain that to a substantial extent, price fluctuations are not correlated to fundamentals.”

Coffee prices began to stablize around August and current prices are around $2.65 per pound for Arabica and $2,100 per ton for Robusta. Furthermore, coffee prices have dropped 20 percent on New York Mercantile Exchange since the end of August, so forecasts predict steady demand but possible drop in output.

“Adverse weather conditions, which could have a negative impact on production or post?harvest activities, have been recorded in a number of exporting countries,” the International Coffee Organization said in its October monthly report.