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G. Chandrashekhar

MUMBAI, Sept. 19

IT now seems possible to rule out the risk of frost in Brazil since the world's number one producer has only recorded one-post August frost some sixty years ago. Official production figures from Brazilian authorities point to 44.7 million bags, or 37.4 per cent of world production for 2002-03.

In view of this, an upturn in world coffee market depends on balancing supply and demand with a cutback in production in many exporting countries and improving quality, according to the International Coffee Organisation (ICO).

Last month, the ICO composite indicator price fell to 42.79 US cents per pound, down 4.3 per cent from 44.70 cents/lb of August 2001. The August 2002 average is the lowest till now this year.

The main market driver continues to be global supply. Despite cutback in production in many origins during crop year commencing in October 2002, a strong Brazilian production will ensure there will be no curb in global supplies.

It is only in 2003-04 that the world could see a shortfall in production following reduced output in many countries and the anticipated operation of the natural biennial production cycle in Brazil, which can potentially reduce output.

Meanwhile, ICO said, the global coffee crisis in which exporting countries are plunged as a result of low prices has reached very alarming proportions and is now being felt in the social, economic and political arenas.

At the social level, many permanent jobs have been lost in exporting countries, triggering a deepening of the economic crisis and a rise in instability in certain regions which until recently were coffee dependent.

The suffering of the coffee growers continues apace, driving governments to search for means to mitigate it and conserve social stability notably by the setting up of support schemes.

There is now expectation that investments funds faced with stock market crisis are likely to take shelter in commodity markets such as coffee.

Coffee prices have reached such a low level that investors may feel that the market would soon bottom out. Even roasters are likely to improve their cover by building new stocks in the wake of expected production cuts in Brazil a year later.

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