Crop fears drive Kenyan coffee to $20,000 a tonne

Could coffee become more valuable than your average base metal?

It is beginning to look that way - at least for top quality arabica beans in Kenya, where dry weather has dashed hopes of a production rise this season.

A lot of premium AA grade coffee sold at the Nairobi Coffee Exchange on Tuesday for $1,011 per 50kg bag, 40% higher than it was achieving last month.

The 340kg lot originated from a central Kenyan growers co-operative, Kiomothai, and was bought by East African specialist C Dormans, which sells to foreign markets besides running a chain of Kenyan coffee shops.

Dornams paid the equivalent of more than $20,000 tonne, making the coffee more than twice as expensive as copper, and approaching the levels that the likes of aluminium, nickel and tin trade at.

'Outlook robust'

The price reflected the dearth of high quality beans for sale, Daniel Mbithi, a Nairobi Coffee Exchange official, said.

"There is no coffee and the market is grabbing the few available offers," he told Reuters, the news agency, adding that "the price outlook remains robust going into the coming weeks".

"Supplies remain tight."

Production downgrade

Kenya, unlike some other African countries, has suffered poor coffee growing weather with unusually late and heavy rains early in 2010 damaging flowering before dry conditions later in the year damaging yields of fruit which did set.

The Kenya Coffee Board on Monday cut to 40,000 tonnes its forecast for the country's coffee output in 2010-11, from a previous forecast of 49,000-55,000 tonnes, and leaving the crop on track to fall short of the previous season's output of 45,000 tonnes.

The influential International Coffee Organisation last week lifted its estimate for world coffee production this season citing better weather in many major African producing nations, with the likes of Ethiopia, Tanzania and Uganda enjoying improved conditions.

In New York, arabica futures for March delivery closed 0.3% higher at 235.35 cents a pound, equivalent to less than $5,200 a tonne.

(Source: http://www.agrimoney.com/news/crop-fears-drive-kenyan-coffee-to-$20000-a-tonne--2717.html)