World Coffee Supply May Drop to 124 Million Bags

World Coffee Supply May Drop to 124 Million Bags  

By Heather Walsh

Nov. 17 (Bloomberg) -- World coffee supply may drop by about 3.2 percent in the current season, after rainfall pared output in Brazil, Vietnam and Colombia, International Coffee Organization Executive Director Nestor Osorio said.

Global supply may fall to about 124 million bags in the year that started Oct. 1 from 128.1 million bags a year earlier, Osorio said in a telephone interview from Bogota yesterday. A bag of coffee weighs 60 kilograms (132 pounds).

Coffee has rallied 23 percent this year in New York, partly after Colombia’s production touched its lowest level since 1974 last season. At the same time, consumption of the bean will increase to 132 million bags this year, buoyed by sales in emerging markets, Osorio said. Consumption was 130 million bags in 2008, according to ICO estimates.

“There is a very tight situation between supply and demand,” Osorio said.

Coffee stockpiles in producing nations are now at a “negligible” level, Osorio said. Inventories in importing nations may rise to 27 million bags, from 25 million-to-26 million bags, Osorio said.

Arabica-coffee futures for March delivery, the most-active contract, slid 1.7 cents, or 1.2 percent, to $1.3775 a pound on ICE Futures U.S. in New York.

Coffee growers in Brazil, the world’s biggest producer, this year will supply 39 million bags, 15 percent less than the prior season’s 46 million. ICO counts Brazilian coffee that has already been harvested as supply for this season, Osorio said.

Prices May Gain

Coffee may gain to $1.45 a pound in the next month, partly on concern that rainfall is hampering supplies from Brazil, Chintan Parikh, a commodity analyst at CPM Group, said today in a telephone interview from New York. ICO’s global forecast for reduced output also will push the price higher in the “longer- term,” he said.

“There have been ongoing concerns about supply,” he said. “That’s putting upward pressure on prices.”

A bigger crop in Brazil is needed to rebuild stockpiles, said Gil Carlos Barabach, a coffee analyst at Safras & Mercado research group in Brazil, in a telephone interview from Porto Alegre.

“If the crop is hurt and gets smaller, it can have a drastic effect over world stocks,” he said.

Output in Vietnam, the world’s second-biggest producer, may slide to 17.5 million bags from 18.5 million bags, Osorio said.

Colombia Rains

In Colombia, rainfall slashed coffee production 31 percent to a 35-year low last season, pushing it below the harvest in Indonesia, now the third-ranked producing country. Colombia’s crop may remain below Indonesia’s production of about 9 million bags in the current season, Osorio said.

The South American country’s coffee output plunged to 8.66 million bags in the last crop, from 12.5 million in the year through Sept. 2008, according to the ICO.

In the season that starts Oct. 1, 2010, Colombia may recover its spot as the No. 3 producer, with output climbing to about 11 million bags, he said.

To contact the reporters on this story: Heather Walsh in Bogota at hlwalsh@bloomberg.net;
Last Updated: November 17, 2009 13:21 EST