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| You are here :Home >> Other Commodities News >> Report | |||||||||
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| 2008-06-04 14:25:05 | |||||||||
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Soft commodity prices also head north Commodity Online NEW DELHI: If you thought only the prices of rice, wheat and other staple items are moving up in the global market, then you are wrong. If you observe the price movement of food items, almost all items are costlier now, including coffee, cocoa and sugar. However, you may not be paying attention to this much because you may not need it but you want it. Inflation is putting upward pressure on the price of these soft commodities just as it is on oil and grains such as wheat and rice. The price of coffee beans has more than doubled in the past few years. According to US Department of Agriculture (USDA), the New York spot price for Brazil’s Arabica coffee is up 20% over last year’s annual average of 110.72 cents per pound. Just five years ago in 2003, the annual average was only 50.82 cents per pound. US imports of coffee and coffee products increased 14% in 2007 to $3.8 billion. However, the coffee prices may come down this year with Brazil’s 2008 coffee crop is just starting to be harvested and is already forecast to be one of the best ever, producing almost 50 million bags of coffee. With Brazil’s larger production this year, world coffee output is expected to reach 133.25 million bags while consumption is seen at 126.0 million. If coffee prices head lower this year, then the buyers of the raw beans are going to be the ones to benefit. The story of cocoa is also similar. On average, the cost of high-quality chocolate, which has a higher cocoa content, has increased over 6% in the last year. That’s because the cost of cocoa has more than doubled since the beginning of 2007. It can be shipped in powder, paste or liquid form and commands $2,600 per tonne on New York’s Intercontinental Exchange, up from $1,700 at the start of 2007. And while cocoa is certainly subject to the same conditions that can affect other crops such as poor weather conditions, the huge increase in price, at least for this commodity, doesn’t seem to be a simple function of supply and demand. For the year ending in September, the International Cocoa Organization only expects a 51,000-tonne shortfall, which can be made up with existing stock. Many analysts and management from some of the leading global chocolate manufacturing firms are pointing the finger at hedge fund investments for the price rise. Take the case of sugar. The USDA recently released its World Sugar Situation report for May 2008. The expected raw sugar production for the 2008-09 marketing year of 161.7 million tones will just barely meet estimated global usage of 160.8 million tonnes. Production is down 3.8 million tones while consumption is up 4.6 million tones from the prior year. But due to trade imbalances, the USDA estimates a 1.1 million tonne shortfall in the 2008-09 marketing year. On its own, Brazil accounts for 20% of global sugar production. Asian countries account for 40%. Brazil, India, Thailand, and China, together, account for half of world production and 56% of world exports. But if demand for ethanol continues to increase, sugar could become even scarcer. Brazil uses sugarcane, rather than corn, to produce the popular alternative fuel. |
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