According to Ted Lingle, the cofounder of Coffee Quality Institute in Long Beach (California), coffee farmers will probably need 2 or 3years to increase the production level. A production increase is needed to satisfy the growing demand, to replenish the reserves of coffee and to lower the prices. The price of “Arabica” has already gained 8.8% this year because of the poor crop yield in such countries as Columbia.
The coffee reserves are rather poor (13M bushels), which is expected to provide significant support for the coffee prices around the world in 2011, Jose Sette, the Head of the ICO, says. According to him, the supplies will remain insufficient until the end of 2011 so there is no reason for the coffee prices to make a considerable decline.
The volume of the coffee reserves lowered after the crop yield in Columbia declined down to 9M bushels, Jose Sette says. The forecast for the harvest of 2011 is also unfavorable – less than 9M bushels (for comparison sake, in 2007 it was 12.5M bushels) – according to the USDA (see the forecast).
As for the perspectives of the African coffee industry, Jose Sette is convinced that the producers of coffee should be more versatile in terms of developing their exports so that the forthcoming crops would be rich. They should reinvest their income from the coffee export to expand the production of coffee and to train the personnel instead of relying on international investments.
The price of Arabica in New York has gained 12% since the beginning of 2011 and 77% since early 2010. The income the producers got as the result of the global price growth should motivate the exporters to expand the production and the share of Africa in global supplies. The African industry has big potential if it is paid serious attention to. The growing global demand for coffee is the stimulus for the expansion of coffee production. It is important to mention that over the last few years the consumption of coffee has been growing in both importing and exporting countries.
At the end of the last week the Vietnamese coffee “Robusta” also grew in price at the domestic market up to $ 2014 per ton. The price growth has been seen since early February and is conditioned by the overall growth seen at the global market of coffee. In particular, in London the price reached $ 2239 per ton, which is $54 more. On Feb 1st the export price in Hoshimi (Vietnam’s biggest city – 7.1M people) also grew from $ 2025 up to $ 2080 per ton.
According to the Department of Commodity Trading, Masterforex-V Academy, the very important tendency of the distribution of coffee products is mainly connected with the high price on coffee. Despite the fact that the prices are extremely high the internal trading volume is still low as the coffee producers wait for the prices to grow higher in order to sell it at better prices. The price growth not only encourages farmers to wait for better prices. It also implies that they can sell less coffee to make up for the expenses.
Previously farmers had to sell coffee to buy fuel and fertilizers. But now they have a chance to wait for better prices. If the tendency continues, the market balance is unlikely see any change towards supply.
At the moment the price of Arabica is at the highest level over the last 14 years - 2703$ per pound (in New York).
The fundamental support is provided by the low reserves in the exporting countries (the so-called safety bag at the labor market; read the article)
The coffee price uptrend continues. Last week the price of coffee updated its 13-year high, reaching 275,9. In terms of tech analysis, after last week’s strong price movement (254,5 - 271,7) there is high probability of a slight retracement followed by another upward momentum. Low global reserves and insufficient production volumes keep pushing up the prices. In long-term perspective there are no fundamental reasons for a significant price correction.
(Source: http://www.profi-forex.us/news/entry4000001050.html)
No comments:
Post a Comment