Coffee prices have "limited potential" for a further
decline, the International Coffee Organization said, cutting its forecast for
world production because of losses to disease in Latin America.
Coffee prices have fallen significantly from highs set in
the first half of 2011, particularly values of arabica beans, which stand at
less than half the 14-year top of 306.25 cents a pound they reached then.
The price decline has been attributed to a strong Brazilian
arabica harvest last year, expected to help return the world coffee market to
production surplus in 2012-13 after successive seasons of deficit.
However, "there seems to be limited potential for further
downwards price corrections", the ICO said, warning that supplies ahead may not
be as generous as had been thought.
While the market had seen a rise in coffee supplies hitting
the market, thanks to harvests from the likes of Brazil, prospects for some
countries harvesting later in the season were not so rosy.
"Some countries in Central America have been affected by
adverse weather as well as coffee pests and diseases, in particular coffee leaf
rust and coffee berry borer, which could have an impact on production levels
going forward," the ICO said.
The organisation downgraded forecasts for production in Costa
Rica and Guatemala, and cautioned of the potential for setbacks in other countries
"Reports of coffee leaf rust in several Central American countries
could still affect the current estimates."
'Still experiencing difficulties'
Furthermore, the ICO cautioned over "further delay" in
Colombia's return to historical levels of production, after successive seasons
when output was hurt by poor weather, which encouraged the spread of diseases
such as the roya fungus, and by the impact of replanting programmes.
"In Colombia the coffee industry is still experiencing difficulties,
particularly as a result of the outbreak of the coffee berry borer, which may
further delay a return to the country's normal production levels," the organisation
Crop year 2012-13, which began in October, "has seen two
consecutive months of lower year‐on‐year production, and the expected recovery
has not yet been realised".
The comments contrast with more upbeat comments from
Colombia's Fedecafe growers' federation, which reported December output at
904,000 bags, up 23% year on year, and has foecast a rise in production in 2013.
The ICO cut by 1.9m bags to 144.1m bags its forecast for world
coffee production in 2012-13.
The group also highlighted: low levels of world coffee
stocks, which opened the season at a record-low 15.1, bags; rising production
costs which were "reducing good agricultural practices"; and the "strong
potential for growth" in consumption in emerging markets.
These are all factors which should, in theory, support
On futures markets, arabica coffee for March reversed early
losses to stand 0.3% higher at 148.60 cents a pound in late deals, while London
robusta coffee was 0.5% higher at $1,925 a tonne.