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International Coffee Organization Says Coffee Prices Won't Fall Dramatically
Coffee prices fell in March and are expected to continue dropping in April, the International Coffee Organization has said.
It sought to reassure the industry, however, that a tighter supply and demand situation than in the past meant prices were unlikely to fall dramatically, as they did between 2001 and 2003.
Prices fell by four per cent in March to around 100 cents (US) per lb, and had dipped below the 100 barrier by 10 April, the International Coffee Organisation (ICO) said.
It sought to reassure the industry, however, that a tighter supply and demand situation than in the past meant prices were unlikely to fall dramatically - as they did between 2001 and 2003.
There was more good news for growers and producer countries as the ICO announced a 20 per cent rise in coffee exports by volume in the first five months of the 2006/2007 year, compared to the same period last year.
And, fears over the El Niño weather phenomenon and its potentially damaging effects in the Asia Pacific region have so far proved largely unfounded this year. "Observations made in March indicate that its intensity has weakened," said ICO executive director, Nestor Osorio.
On consumption, Osorio remained optimistic about emerging markets such as China in driving coffee growth. He said consumption was growing by 1.5 per cent annually and should reach 120m bags this year.
"Although consumption in traditional importing countries is showing signs of stagnation, consumption is growing at a dynamic rate in a number of emerging economies and in some non-member countries."
ICO officials recently told BeverageDaily.com that increasing coffee consumption in emerging markets and grower countries themselves was a key part of their strategy for maintaining a market balance going forward.
Marketing funds are likely to be allocated for this purpose in a new International Coffee Agreement, which is currently being discussed by ICO member countries.
An EU source close to the discussions told BeverageDaily in February that talks for a new agreement, which would provide a forum to tackle industry-wide issues, had stalled. Osorio has repeatedly denied this and repeated in his March coffee report that talks were on track.
Vending and coffee service operators should heed the ICO's warning and not base their future pricing on the short-term declines. The long-term trend in coffee prices has been upward, which is why most of the nation's coffee retailers have increased coffee prices.
Vending and coffee service operators need to raise prices as aggressively as possible. The convenience stores and quick-serve restaurants have revamped their coffee programs to promote better coffee and have raised their prices in recent years. They are doing this because they realize that the consumers are more interested in better quality coffee and are willing to pay for it.
Coffee is one of the poorest producing segments in the vending industry, due mainly to population declines. Hot beverage machines are more expensive than cold drink or snack machines, and operators need larger locations for these machines in order to recover their investment.
In locations that have enough people to warrant a hot drink machine, vending operators need to provide a certain level of quality to win the coffee sale. The bar has gotten higher as the competition has invested more in product quality.
amonline.com
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