The Hindu Business Line : Firm global coffee rates spark hope

HAVE global coffee prices started to bottom out? Chances are that the market has commenced its recovery process, although some say it is a little too early assert. Price movements last month marked a break from the past. The downtrend in prices halted in September. The monthly average of the ICO composite indicator price rose from 42.79 cents per pound in August to 47.96 cents/lb, an increase of 12 per cent last month. The September average was the highest for the last 16 months, with the exception of March and April 2002.

The upward movement was the result of speculative positions by investment funds, which are reacting to the expected downturn in world supply, according to the International Coffee Organisation (ICO).

The assistance programme to Brazilian producers, based on option contracts, which should make it possible to stockpile part of the 2002-03 crop, also seems to have prompted this price rise, ICO said, adding that the scheme's guarantee price seems to have become the benchmark for the international market.

Price developments during September seem to represent a real trend rather than a seasonal phenomenon observed that month every year. No constant relationship has been detected to explain it. Observation of historical price movements from coffee year 1965-66 to 2001-02 does not reveal any pattern of seasonal price change during the month of September, according to the ICO executive director.

During coffee year 2001-02 that ended last month, world production was 117.3 million bags. Including the opening stock of 36.7 million bags, total availability worked out to 154 million bags.

World consumption in 2001-02 was an estimated 108.2 million bags (81 million bags in importing countries and 27.2 million bags in exporting countries), leaving a closing stock of 45.8 million bags.

Notwithstanding the modest improvement in prices and prospect of a recovery, the coffee crisis remains a danger both to the economies of exporting countries and the lives of their coffee growers. It is still exacerbating social and political tensions in these countries.

The coffee quality improvement programme has begun to be implemented from October 1, 2002. A rigorous and effective implementation can contribute to rationalisation of supply, ICO believed.

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