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Coffee Price - Results of Conference in Tanzania
Coffee's 42% gain during the past year may be difficult to sustain as production threatens to exceed demand, said Nestor Osorio, executive director of the International Coffee Organization.
"This is not the moment to increase production," Mr. Osorio said in an interview today at the Eastern African Fine Coffee Association conference in Arusha, Tanzania. "If production is controlled, we could keep the same level of prices."
African growers such as Angola, once the world's fourth-biggest producer, and Tanzania want to increase harvests. Angola lost market share during the past two decades as wars and rising energy costs hurt harvests. Africa's share of global production fell to 12% last year from 29% in 1986.
Robusta coffee for delivery in May rose $28 a metric tone, or 2.4%, to $1,213 on London's Liffe exchange at 11:14 AM local time. Arabica for May delivery dropped on the New York Board of Trade. "We are now getting at a difficult level in the sustainability of price," Mr. Osorio said.
Angola plans to boost output 40-fold over an unspecified period as it strives to recover from a 27-year civil war that ended in 2002, officials said at a March conference. In 1975, the year the war started, the southwest African country produced 1.06 million bags of coffee, compared with 1,955 bags last year, according to ICO data. Tanzania, Africa's fourth-biggest producer, announced plans to increase output by 84% by 2008 to 70,000 metric tons, which equates to 1.17 million bags.
The London-based ICO said on January 16 that coffee production in the 2006-07 season will be between 120 million and 122 million 60-kilogram bags compared with consumption of 118.7 million bags. That contrasts with the organization's forecast for demand to exceed supply by 7.2 million bags in 2005-06.
Robusta, a bitter tasting variety used mainly in instant coffee, gained in 2005 for a second year, reversing a decline in 2003. The price has fallen in six of the past 10 years, declining to as low as $345 a tone in 2001. Arabica, a milder, more expensive variety, rose every year between 2002 and 2005 after slumping to as low as 42.2 cents a pound in 2001.
The current prices shouldn't tempt producers into increasing production, Mr. Osorio added. Rising oil prices and a weakening dollar are pushing up costs for growers.
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