[Vnbiz] Coffee prices set to rise even higher due to Brazil crop woes

[Phan, Tai]

Coffee prices set to rise even higher due to Brazil crop woes
By Claire Leow
Bloomberg
Tuesday, December 5, 2006
HO CHI MINH CITY, Vietnam - The coffee crop in Brazil, the world's largest producer of the bean, may slump by as much as 20 percent in 2008 because of dry weather, the head of the International Coffee Organization says.

"Brazil enters now into a year of low production," Nestor Osorio, the group's executive director, said today. "There have been problems with the weather and the rains. ... It will be a tight situation with the market."

The price of coffee has been rising on surging global demand. Arabica beans have gained 16 percent this year, while bitter-tasting Robusta beans have jumped 20 percent. Global coffee output varies between 105 million and 120 million bags a year.

Brazil will produce about 41.6 million bags in the year ending September 2007, Osorio said in an interview in Vietnam at a coffee conference, referring to the beans that were harvested between July and August of this year.

"The next crop is the 2007-08 one, to be harvested starting June, July next year, and this is the crop that is in the trees at the moment," Osorio said. "The next crop will be lower, it could be 10 to 20 percent less. We will know in three, four, five months" after studying the flowering season.

Drier weather can stunt the flowering of coffee bushes, and can slow so-called cherry-setting, the when plants' flowers turn into harvestable beans.

As Brazil is the world's top coffee producer, swings in its supplies "account for a large portion of the change in the world total supplies," the U.S. Department of Agriculture said in a June report. A 20 percent decline in Brazil's coffee harvest for 2008 would equate to more than 8 million bags.

The London-based International Coffee Organization groups 75 coffee-exporting and consuming countries, according to its Web site. Osorio has been the group's executive director since March 2002.