Cepea joined the ranks of commentators urging caution over
the revival in coffee prices, cautioning that ample supplies, pegged at a
five-year high, may provoke a fresh downturn in values.
New York arabica coffee for March stood 0.7% higher at 115.00
cents a pound in morning deals on Wednesday, amongst its highest levels of the
last two months.
In London, while robusta coffee for March was 0.8% down at
$1,704 a tonne, that is still nearly 20% higher than an early-November low, with
sentiment revived by talk of Vietnamese producers holding back supplies from
their record harvest.
However, Cepea cautioned that "high world supply, enough to
generate a coffee surplus", may still send prices back to a downward path.
'Press down quotes'
The research centre, linked to Sao Paulo University, cited a
US Department of Agriculture report estimating that world coffee production in 2013-14,
while set to decline 2.8m bags to 150.5m bags, will remains 6.1m bags ahead of
This will allow world stocks to reach 36.3m bags at the
close of the season, the highest since 2008-09, "when grain prices were also at
low levels", Cepea said, with New York arabica futures, touching 101.60 cents a
The "good performance"
of farmers in countries including Vietnam, the top robusta grower, and Colombia
- whose revived harvest has regained the country third place among world
producers, overtaking Indonesia – "limits losses" to world supplies caused by
rust in Central America.
"In spite of the record consumption in this 2013-14 season,
perspectives of high stocks may continue to press down quotes," Cepea said.
The analysis tallies with expectations from many brokers of
lower prices ahead, with Macquarie forecasting that, for arabica prices, "further
downside to the 90s cents a pound level is likely into the New Year.
"Brazil's flowering for the 2014 'on' crop has been promising,
while Colombia's strong rebound in supplies should help offset losses in
Rabobank forecasts arabica prices averaging 90 cents a pound
in the July-to-September period - a level not seen since eight years ago – as a
"third year of surplus production and producer currency weakness" weighs on
The bank sees London robusta futures averaging $1,400 a
tonne during the quarter, a level last hit in June 2010, also depressed by "supply
The price weakness is wreaking a major impact on coffee producing
countries, for many of which the bean is a big earner for their rural
A report from the Confederação da Agricultura e Pecuária do
Brasil and University of Lavras this week showed that in Brazil, the top coffee
growing country, only fully mechanised farms, whose costs were R$261.36 a bag, had
a chance of making a profit.
Average sales prices were R$276.86 a bag for arabica coffee,
and R$276.86 a bag for robusta beans.
For semi-mechanised farms, costs were R$342.91 a bag, and on
plantations relying solely on manual labour for harvesting, production costs
were R$388.58 a bag.
Meanwhile, Brazilian import data for November showed a 39%
slump, month on month, to $361m in the value of coffee exports, despite a drop
of only 10.3% to 2.55m bags in volumes.