Maravi

ICO predicts rise in coffee prices

ICO predicts rise in coffee prices
By Fridah Zinyama
Tue 19 Jan. 2010, 04:00 CAT

COFFEE prices on the international market are likely to increase further this year due to tightness of supply from producing countries and an increase in consumption, according to the International Coffee Organisation (ICO).

The ICO noted that coffee supplies may therefore be limited in 2010 bearing in mind that opening stocks were at low levels, and that adverse weather conditions could affect the quality of crops and stimulate the occurrence of diseases affecting coffee trees.

In the 2009 report, ICO president Dr Nesto Osario (below) stated that stable production in Africa and a number of other countries may not be enough to offset the lower production of countries currently experiencing supply problems.

“The increase in labour and fertiliser costs is one of the main factors in this limitation of supply. Information provided by exporting countries has enabled me to establish my preliminary estimate of total production in crop year 2009/2010 at around 123.7 million bags,” he stated.

Dr Osario stated that coffee prices rose during December, particularly in the case of Arabicas, bringing the monthly average of the ICO composite indicator price to 124.96 US cents per pound compared to 119.67 US cents per pound in November.

“This monthly average for December is the highest recorded since the outbreak of the world economic crisis in September 2008,” he pointed out.

Though prices of coffee on the international market are likely to maintain an upward trend throughout this year as projected by the ICO, it is unlikely that Zambia will take advantage of this trend by producing more.

This is mainly because coffee production in the country is now becoming difficult due to several factors that go into its production such as access to finance, electricity and fertiliser, among others.

Zambia’s coffee production has tumbled over the years from highs of 6,500 metric tonnes in 2004 to lows of 1,500 metric tonnes this year.

Zambia Coffee Growers Association general manager Joseph Taguma lamented the country’s decrease in coffee production and attributed it mainly to a lack of access in long-term financing.

Taguma said commercial banks in the country did not offer long-term financing to the agriculture sector, especially for tree crops like coffee which took a long time to mature.

“It is because of a lack of adequate access to finance which has caused both small and commercial coffee farmers to drop from producing the crop,” he said. “Recently, coffee plantations like Kasama Coffee and Munali Coffee were under receivership because of difficulties in accessing finances.”

Taguma however added that Munali Coffee had managed to repossess the farm and was back on track in terms of coffee production.

“We would like government to intervene because we believe that there is a future in coffee growing and agriculture generally,” he said. “One thing that can assure finance providers is the fact that coffee will always be consumed on the international market and the fact that coffee is the second most traded commodity on the international market.”

Taguma argued that although coffee prices fluctuate on the international market, the same could be said for other commodities on the world market.

“There are still many challenges we are facing which are making the sector grow at a slow pace,” Taguma said.

Taguma said coffee production was being constrained by lack of long -term financing, transport and higher labour costs as well as fuel prices, forcing many farmers to stop growing coffee in preference to other export crops.

Zambia grows and exports washed arabicas, including its premier triple A brand coffee mainly shipped to Japan.

“The number of small- scale farmers has shrunk to about 91 from 161 while only 18 commercial farmers grow coffee on a large scale. There are several problems which are forcing farmers to stop growing coffee,” Taguma said. “To grow coffee on a viable basis, we need financing of between eight and 13 years, but banks cannot lend on those terms. The labour costs are also very high in this country and this is discouraging farmers.”

Taguma said coffee growers were also facing tougher competition from copper miners for road transport due to an unreliable railway network.

He said transporting coffee to sea ports would become a problem as more foreign mining firms begin to use trucks to carry copper to Dar-Es-Salaam in Tanzania and Durban in South Africa.

And in 2006, most farmers cut jobs and reduced their coffee production in Zambia when the kwacha appreciated against the United States dollar by 30 per cent.
Taguma, however, said the future of the coffee industry was bright despite the problems farmers were facing.

Zambia’s coffee production cannot match that of Kenya and Ethiopia who produce the crop on a large scale basis, but the product is mostly sought by buyers in Japan, the United States and Europe.

Meanwhile, Zambia National Farmers Union (ZNFU) president Jervis Zimba said the coffee industry had enjoyed a rather good year in 2009 with a world market that had been very firm averaging US cents 130 per pound (US $2,866/ metric tonne), with the March 2010 trading position for the country’s main coffee export, Arabica, closing at US $3,223/ metric tonne.

“The market is billed to continue in the coming year at about the same levels with occasional ups due to increased consumption which is surpassing current production, a phenomenon we have not experienced since the late 1990s,” he said.

Zimba said though prices were likely to continue being good in 2010, the local coffee producers had been facing cash flow problems, affecting their ability to acquire the required inputs which would enable them to produce a good quality product.

“I believe that producing good quality coffee has its plus because the commodity is able to fetch more on the international market,” said Zimba. “For example, some growers who have done so have achieved an average to date of US $3,700/ metric tonne of their Arabica.”

And former agriculture minister Dr Brain Chituwo challenged stakeholders in the sector to use coffee as part of a tourism package to attract tourists to the country.
Dr Chituwo said Zambian coffee was of high quality that needed to be promoted to gain international recognition.

“Coffee originates from Africa such as Arabica from Ethiopia, Robusta from Uganda and yet it is mostly consumed in the western countries and the Far East. It is therefore important that we continue to promote its quality as the market is available both in Africa and beyond,” Dr Chituwo said. “And I urge the coffee board and the Coffee Growers Association to partner with the tourism board and the hotel industry to ensure that our Zambian coffee is promoted as part of the tourism package.”

Dr Chituwo assured coffee producers that the government would remain supportive to ensure that the industry was successful since the export of the commodity was presently earning the sector an average price of US $3,200 per metric tonne of green beans.

And Zambian Gourmet Coffee representative Teija Lublinkhof has urged the government to provide some form of support since the cost of coffee production was too high for many growers to succeed and compete effectively on the international market.

Labels: COFFEE, INFLATION, INTERNATIONAL COFFEE ORGANISATION, NESTO OSARIO

posted by MrK @ 6:18 PM