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＞ BEIJING, Jan. 3
Coffee prices may rise to a six-year high in 2005 after outpacing major commodities this year, a Bloomberg survey found. Smaller crops in Brazil and the growing appetite for lattes may spur the increase.
The price of arabica coffee futures listed on the New York Board of Trade, the world's biggest coffee exchange, will average US$1 a pound next year, based on the median estimate of 11 analysts and roasters. That is 30 per cent higher than 2004. The futures are benchmarks for coffee sold by Procter & Gamble Co's Folgers and Kraft Foods Inc's Maxwell House brands.
Coffee futures jumped 60 per cent this year, more than commodities including crude oil, sugar, copper and hogs. Suppliers were squeezed by rising demand from Starbucks Corp and other buyers at the same time the outlook deteriorated for crops in Brazil, Viet Nam and Indonesia. Those countries account for 48 per cent of global coffee-bean exports.
"I wasn't a believer in this market until about two weeks ago," said Nicholas Becharas, president of Highland Park, Michigan-based Becharas Brothers Coffee Co, which sells about 2.5 million pounds of coffee a year to restaurants and the US Navy. "The roasters are caught a little bit here and need to buy."
Coffee futures on December 21 reached US$1.087 a pound, the highest since July 2000. The 2004 average was 77.12 cents, up 23 per cent from 2003.
The contract for March delivery on Friday fell 4.2 cents to US$1.0375 a pound, the last session this year.
The peak in 2005 will be US$1.275, the median of 10 forecasts in the Bloomberg survey. Prices haven't been that high since December 1999.
Global coffee consumption this year reached an estimated 118 million bags, up 2.4 per cent, German research company F. O. Licht said in a December 23 report. Demand in the United States, the world's biggest coffee consumer, surged 9.2 per cent in 2003, the latest figures available from the US Agriculture Department.
Seattle-based Starbucks, the world's largest coffee-shop chain, boosted US prices by 11 cents a cup in October, the first increase in four years. Sales at coffee shops open at least a year rose 13 per cent in November, the biggest gain in nine months.
"It's a growing product in the US because more people are looking for a better beverage," said Randy Layton, vice-president of coffee operations at Portland, Oregon-based Boyd Coffee Co. "Beans that make up better coffee are becoming more difficult to find."
Dry weather associated with El Nino may have contributed to reduced production in Brazil and Viet Nam, said Michael McDougall, a trader at Fimat USA Inc in New York. Viet Nam's crop was 12.8 million bags in 2004, down 9.9 per cent from a record 14.2 million bags in 2003, F.O. Licht said.
Coffee prices fell from 1998 to 2001 as larger crops worldwide overwhelmed demand from roasters.
Prices touched a 30-year low of 42.7 cents a pound in October 2001 as Brazil's crop headed for a record 63.8 million bags of coffee in 2002.
The low prices discouraged farmers from planting new trees or taking care of existing plants, leading to reduced production in Central America and Africa, US Agriculture Department reports said. It takes 2-and-a-half years after a coffee bean sprout is planted for the tree to produce coffee, McDougall said. A grower can boost production as much as 20 per cent in a year by taking better care of the trees, he said.
German trading company Neumann Kaffee Gruppe said dry weather in recent years has caused "serious damage" to Brazil's coffee trees.
The world's biggest grower of beans, Brazil, will produce 30.7 million to 33 million bags next year, down from 38.6 million this year, the Brazilian Agriculture Ministry said on December 10. A bag of coffee weighs about 132 pounds, or 60 kilograms.
Production in Indonesia probably fell 3.3 per cent this year, the third-straight annual decline, to 5.8 million bags, the US Agriculture Department attache in Jakarta said November 22.
Coffee from Indonesia's Sumatra island was selling for US$1.84 a pound before the December 26 earthquake and resulting tidal waves, said Peter Longo, owner of New York-based coffee roaster and retailer Porto Rico Importing Co.
"I would think after this catastrophe in the Indian Ocean, we may see Sumatran coffee at US$4 or US$5 a pound," he said.
Sumatra accounts for 71 per cent of Indonesia's coffee production.
"All eyes are on Asia because of the floods," said Helmut Ahlfeld, managing director of German research company F.O. Licht GmbH. "The first report was there was no significant damage."
Prices may go as high as US$3 a pound in 2005 because producers do not have sufficient inventory to make up for increased global consumption, said Judy Ganes, president of J Ganes Consulting LLC in Katonah, New York. "This is an incredibly powerful bull market."
Higher coffee costs led Procter & Gamble and Kraft to raise retail prices by 28 cents a pound, or 14 per cent, in December. Sara Lee Corp's foodservice coffee division is raising prices by 35 cents a pound on January 17. Sara Lee owns the Chock full o' Nuts, Hills Bros, and Chase & Sanborn brands.
Becharas Brothers plans to boost prices February 1 by 35 cents a pound, said Becharas, the company president.
Arabica coffee accounts for about two-thirds of the world's coffee output. Robusta coffee that trades on the London International Financial Futures and Options Exchange sells for about 33 cents a pound, and prices rose 7.6 per cent in 2004.
Mexico, India and countries in South America and East Africa grow the arabica coffee bean that can be delivered against New York futures contracts.
Brazil may overtake the United States as the world's biggest consumer by the end of the decade, with demand rising to 16 million bags this year, up 7 per cent from 2003, F.O. Licht said in its report