Global coffee prices to plunge again

Global coffee production is expected to increase significantly, setting farm prices on a downward spiral.

Latest statistics by the International Coffee Organisation show that world coffee production in 2012/2013 will increase significantly, boosted by on-year increase in the Brazil cycle of Arabica production.

Strong production levels are also anticipated in several exporting countries, except in Vietnam.

The ICO composite indicator price fell further in November by 7.3 per cent to 136.35 US cents per pound, compared with October, its lowest level since May 2010.

Coffee prices have been dropping in Kenya, mostly due to strengthening of the shilling against the dollar and weaker economies in Europe and America, the major destinations of local coffee.

The fall in global coffee prices is likely to hit Kenya farmers hard due to the huge debt they have accumulated, with payment pegged on high prices experienced over the past two years.

Some coffee societies have bought new mills through loans in recent years, which means even lower income for them. The government released Sh750 million two weeks ago to cover for some past loans that amount to Sh4.7 billion that the societies had borrowed from co-operative unions.

Arabicas and Robustas

World coffee production is estimated to record 146 million bags, an 8.4 per cent rise in 2012\2013, compared with 134.6 million in 2011/2012.

“In Africa, early indications are for relatively strong crop production of Arabicas and Robustas, compared with last year. Increases are provisionally forecast in Cameroon, Kenya and Tanzania, which will bring total production in Africa to 16.8 million bags, representing 11.5 per cent of the world total,” ICO says in its report.

Kenya’s coffee production is expected to increase to 850,000 bags, compared with 680,000 bags recorded last year, a trend projected in other African coffee producing states.

Ethiopia, which experienced lower production at 6 million bags in 2011/2012 is set to recover and record 6.5 million bags, with Uganda getting 3 million bags from 2.8 million bags last year, owing to fairly dry weather.

Tanzania is expected to bring 918,000 bags to the market. Côte d’Ivoire, which recorded 1.9 million bags last year on account of political unrest, is expected to maintain the same production levels.

Total production of Arabicas is estimated at 90 million bags, about 10.6 per cent rise, compared with 81.3 million bags in 2011\2012, owing to the Brazilian cycle of Arabica production.

Total world coffee exports from January to October 2012 was 92.2 million bags, compared to 87.5 million bags in the same period last year.