Stock strategy for coffee producers

Similarly, ICO is also working on developing a funding mechanism to ensure that small coffee growers who account for bulk of the coffee output in countries like India have access to cheap funding to ensure that they carry out not just regular operations but also invest in re-planting.

Oct 09, 2009 08:10 IST India Infoline News Service

London-based International Coffee Organisation (ICO) is studying methods to enhance coffee inventory levels in producing nations. The move is expected to ensure that major producers do not dump produce in the market which could lead to a decline in prices.

“While coffee consumption has certainly risen from 102-104 million bags in the early 2000 to about 130 million bags in 2008, inventory in producing nations has slipped from the usual level of 35-40 million bags to about 15-17 million bags. We have seen instances where the producing nations keep supplying into the market, which impacts coffee prices,” said Nestor Osario, executive director at ICO.

Similarly, ICO is also working on developing a funding mechanism to ensure that small coffee growers who account for bulk of the coffee output in countries like India have access to cheap funding to ensure that they carry out not just regular operations but also invest in re-planting. Re-planting,  Osario believes, is a better option than bringing in additional acreage under coffee cultivation.

He said rising cost of inputs, notably fertilisers, and a depreciating dollar were adding to the grower's woes. He cited the example of his home country, Colombia, where the local currency Peso has appreciated from 3,000 to the dollar in 2002 to 1,700-1,800 as of date.

On the crop front, he said the rally in global coffee prices in 2008 and early 2009 was led by a decline in output notably from Colombia (where output fell by three million bags) and other Central American nations. The rally could not be sustained as both Brazil and Vietnam resorted to higher exports with the former selling in excess of 30 million bags.

Mr Osario expressed optimism that India's expected output of 3.1 lakh tonnes, according to the post-blossom estimate of the Coffee Board, could help it overtake Mexico, the fifth largest coffee producing nation. As per ICO estimates, Mexico had a production of 4.65 million bags, compared to India's 4.372 million bags. Brazil is the world's biggest producer with an output of 45.99 million bags.

Although bulk of the global coffee output comes from the developing world, 58% of the consumption happens in the developed world with 39% of this being consumed in Europe. North America, notably the US, accounts for 20% of the consumption.

Source: The Economic Times        

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