LONDON (Commodity Online): Where is coffee price heading? Will coffee production go down or surge? Here is an analysis of coffee prices and production details, from the International Coffee Organization.

Coffee prices were on the increase until mid-September before a downward correction towards the end of the month. From 121.59 US cents per lb on 17 September, the ICO composite indicator price was down to 113.80 US cents per lb on 30 September, resulting in a slight fall in the monthly average for September compared to the figure for August.

Arabica prices fell, particularly in the case of Colombian Milds, which were 4.28% lower than their level in August, causing a further narrowing of differentials with the other groups of coffee. Nonetheless, the average price of Colombian Milds in coffee year 2008/09 was 12.8% higher than the level recorded in coffee year 2007/08 whereas the average for the same period for the other groups of coffee was lower.

The behaviour of Arabica prices in September was also characterized by marked volatility, as illustrated by the behaviour of the NewYork ’C’ Contract (average of 2nd and 3rd positions), which started the month at 121.58 US cents per lb, rose to 141.70 on 22 September, and retreated to 131.65 at the end of the month.

Total production in crop year 2008/09, which has ended in all exporting countries, was 1 28.8 million bags, while total consumption for 2008 was around 130 million bags.

Exports by all exporting countries during August totalled 7.3 million bags, bringing the cumulative total for coffee year 2008/09 (October 2008 – August 2009), to 90.5 million bags compared to 88 million b ags for the same period in coffee year 2007/08.

It should be noted that at the 103rd Session of the International Coffee Council, held from 23 to 25 September 2009, a new time limit of 25 September 2010 was established for the signature and deposit of instruments of ratification, acceptance or approval of the International Coffee Agreement 2007.

In addition, pending the completion of the formalities required for the entry into force of this Agreement, the Council decided t o approve a one-year extension of the International Coffee Agreement 2001. Lastly, I would like to express my compassion and commiseration for coffee growers in Asia who were affected by several natural catastrophes, including a powerful earthquake in Indonesia, heavy flooding in India, and a tsunami that struck both Vietnam and the Philippines.

Price movements
The monthly average of the ICO composite indicator price was down by 0.89% from 117.45 US cents per lb in August to 116.40 US cents per lb in September. However, the behaviour of prices during the first week of October seems to indicate a return to the upward trend.

Prices for the Robustas group increased by 2.03% in September, while prices for the other three groups fell.

In the case of the Other Milds and Brazilian Naturals groups the fall was less marked than for the Colombian Milds group. As a consequence, the differentials between Colombian Milds and the other groups of coffee narrowed further (Table 2). The average annual price of Colombian Milds in coffee year 2008/09 increased by 12.77% in relation to the previous year, up from 145.79 US cents per lb to 164.41 US cents per lb. Prices of the other three coffee groups fell during the same period.

After reaching the level of 80.62 US cents in May the price differential between Colombian Milds and the New York ’C’ Contract has fallen steadily, with the September level at 46.12 US cents per lb compared to 53.34 US cents per lb in August.

The figure for total production in crop year 2008/09 has been revised upward to the level of 128.8 million bags compared to 118.3 million bags in 2007/08. This revised figure for total production is mainly attributable to production for Vietnam, which
was adjusted to a level of 18.5 million bags.

At the end of crop year 2008/09 the most significant falls in production (more than 10%) were recorded in Ecuador (-37.8%), Colombia (-24%), Honduras (-22.5%), El Salvador (-12.4%), Costa Rica (-11.8%) and Ethiopia (-11.3%).

In conclusion, it may be noted that, except in the case of Colombian Milds, coffee prices were lower in coffee year 2008/09 than in the previous coffee year. The fall in prices was more marked in the case of Robustas and Brazilian Naturals. Tight supplies of Colombian Milds in coffee year 2008/09, attributable to climatic problems and a coffee tree replanting programme, contributed to firm prices. A return to a normal supply situation in Colombia is envisaged during crop year 2009/10.