As we are coming to the harvest of coffee in Central America is worth mentioning the points we feel are relevant to the market at this moment in time.
I want to give you my opinion, for whatever is worth, and as usual I remind you that this is not to be taken as advice but I intend to just be your eyes on the ground and hopefully be part of the total information you take and you can use it in your decision making.
My last predictions were quite accurate and considering that all of this is a big gamble I will dare to predict again.
The NYSE market has been quite steady in holding the prices up, this is relevant and unusual as we see the european economies collapse, commodities go up and down, and the foreign currency wars get even more entrenched.
All this combined, this events would have caused the coffee prices to drop, but in a trend that is not common we have seem them quite steady.
The bad weather in the Latin American producing areas, particularly North of Colombia and South of Mexico have done little to help ease the prices. Even as we expect the production to be slightly higher than last year, it seems that the thirst for good quality arabicas is going to increase by at least 10% in global consumption, whilst the production might be 6% than last year.
Closer to home, we are, as a nation dropping the usage of instant coffee. Ten years ago 90% of Australians drank instant coffee, the national average is now down to about 50%, Specialty coffee is on the increase, and the AUD$ strength has been the salvation for our industry.
As we start the harvest in Honduras, we face the unusual situation of sporadic rains and yet our trees have not lost much of the fruit (contrary to what happened in El Salvador and other low altitude areas).
I believe that the quest for good quality arabicas will be a tad more expensive in the next few months, mainly because the bulk of farmers will see little benefit in spending the extra money in keeping up the quality, they are still trying to pay loans and recover form years of lower prices, the prices of coffee at a commodity level can rise up to around USD$2.60 in the next few weeks if original targets are not met. This will bring the "milds" market and the plus to a mark of around $2.90.
It wouldn't take much to tip this higher, all we need to see is the crazy stock market volatility to realise how vulnerable this situation can be if any of the coffee producing countries hits adversity or if one of the bigger hedge funds decides to play with the market.
We expect the next crop to be available from end of January 2012, we still have stock should you need it before then of the 2011 crop.
I hope this info is useful!
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