Arabica Coffee Prices to Rise
Arabica coffee futures are expected to rise by the end of the year, boosted by a weak U.S. dollar and the prospect of a cyclically smaller Brazilian crop in 2009/10, a Reuters poll showed on Monday.
The robusta coffee market will ease from current levels as top producer Vietnam readies for a bumper crop, the poll showed.
The median forecast of 21 analysts and traders polled by Reuters was for an 8 percent rise in the cost of arabica beans on the U.S . ICE Futures by the end of 2008 from the end of 2007.
Robusta was seen below current levels but still up nearly 20 percent year-on-year.
“Concern about a supply shortfall again in 2009/10 with output dropping to 125 million (60 kg-bags) and use rising to 134.5 (million), world stocks will drop to an all-time low. High cost of production could force farmers to cut corners,” said Judith Ganes Chase, of J Ganes Consulting in New York.
The ICE front-month arabica futures contract was pegged at $1.40 per lb by the end of the third quarter and $1.475/lb by the end of 2008, up from $1.362/lb at the end of 2007, according to the median estimate.
Arabica futures settled at $1.356/lb at 1058 GMT on July 18, basis first position.
Coffee farms in the world’s biggest coffee grower Brazil have biennial swings that produce a larger arabica harvest roughly every other year.
While the 2008/09 crop will help to replenish stocks, the swing to a smaller 2009/2010 Brazilian crop will lower bean availability, said Kona Haque, analyst at Macquarie Bank in London, noting stocks are at historical lows.
“Rising input costs, energy and fertilizers should support prices from the bottom as well as affect future supply, particularly from Vietnam… where inflation is running high,” Haque said.
Liffe’s second-month robusta futures contract was seen at $2,275 per tonne by the end of the third quarter and remaining there by the end of the year, up from $1,907 per tonne at the end of last year, the median estimate showed.
On Monday, robusta futures were dealing at $2,353 per tonne at 1057 GMT, basis second month.
The coffee market soared to multi-year highs in February, with the then most-active second-month arabica contract hitting a 10-year peak at $1.7190/lb, as investors took money out of struggling stock markets and poured it into soft commodities.
By early March, robusta futures trading on Liffe climbed to a 12-1/2-year high at $2,815 a tonne.
Arabica coffee is typically used in premium coffees while robusta is either blended with arabica beans for a lower-cost brewed coffee or processed into instant coffee.
Expensive energy
Key factors expected to drive the coffee market included rising energy prices and the state of the world’s economy, poll results showed.
“As index funds take in their profits from the other investments, they will probably turn towards coffee and ethanol for new gains, especially if the Brazilian flowering indicates a smaller than expected yield for the (2009/2010) crop,” said Christian Wolthers, of Wolthers America Inc. in Fort Lauderdale, Florida.
Global production for the 2008/09 crop year was pegged at a median of 138.25 million 60-kg bags. World consumption for 2007/08 was projected at 125 million bags and for 2008/09 at 128 million.
The International Coffee Organization has estimated 2008/09 world coffee production around 128 million bags, and revised its 2007/08 estimate at 118.2 million bags.
In top coffee producer Brazil, the median estimate put the 2008/09 crop at 51 million bags, higher than the government’s recent forecast at 45.5 million bags and up from the 33.7 million bags in 2007/08.
The median projection for Vietnam’s 2008/09 robusta crop was 21.5 million bags, with estimates in a tight range from 19 million to 22.5 million
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Source: www.felxnews.com
