Coffee growers are once again facing sleepless nights as bean prices are on the downward curve in the last few weeks. As the news that Brazil would harvest a better than expected crops for 2015-16 spread, prices have started falling and in the last two months, Arabica prices have declined 30%.
Currently, Arabica bean prices are ruling at 125 cents per lb compared to 180 cents per lb in October 2014. Since February 9, prices have declined 15% compared to 148 cents per lb. The ICO Composite Indicator prices stood at 127.97 cents per lb on March 12, the last trading session, the lowest price in the current month.
LIFFE Robusta coffee futures extended losses to a 13-month low on March 12, on fund and technical selling. LIFFE May Robusta coffee futures closed down $52, or 2.9%, at $1,768 per tonne, after touching $1,756, the lowest level since February 2014, the Coffee Board said.
"The long dry weather prevailing in Brazil last year had led to a belief that the country would harvest shorter crop in 2015-16. However, good rains in January and February in that country has now changed the outlook and it is expected to harvest a better crop than expected. This resulted in price fall everywhere," Ramesh Rajah, President, Coffee Exporters' Association told Business Standard.
The news of improved weather in Brazil added to the selling pressure. Farm gate prices in Karnataka, which contributes 70% of India's coffee output, have crashed by 20-22% since early January. Arabica prices have declined to Rs 8,750 per bag (each bag is 50 kgs) from Rs 11,000 per bag, showing a decline of 20%. Robusta prices have also declined by 20% to Rs 2,800 per bag from Rs 3,500 a bag in December and January. The harvesting for the current crop is nearing completion in major growing regions of South India including Karnataka.
"We expect the bearish sentiment will continue through the rest of this year and prices will move sideways in the coming months. The situation may slightly change once Brazil starts its harvest in June this year," Rajah said.
The Coffee Board, in its post-monsoon estimates, projected 331,000 tonnes of bean production for 2014-15, about 8.7% higher than the last year's production of 304,500 tonnes. This comprises of 231,400 tonnes of Robusta and 99,600 tonnes of Arabica. Coffee exports, during January 1, 2015 to March 12, 2015, declined 18.2% to 61,142 tonnes as against 74,741 tonnes.
Despite the downward pressure on prices, world production is expected to come to 142 million bags in crop year 2014-15, about 3.2% less than 2013-14 and its lowest level in three years. This puts the coffee market into a deficit for the current year, although stocks in exporting countries have so far allowed exports to continue at a strong pace, International Coffee Organisation (ICO) said in its latest report.
Source:business-standard.com
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