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Kenya: Coffee Prices Could Dip On Increased Brazilian Yield
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Business Daily (Nairobi)
12 May 2008
Posted to the web 12 May 2008
Allan Odhiambo
Coffee prices in Kenya and other international markets could dip following a larger than expected yield by Brazil - the world's largest producer.
In its latest estimate the Brazilian Government said it expected 45.5 million bags during the 2008/09 season - a 35 per cent increase from 2007/08. It had in January projected an output of 41 million bags but steady weather patterns in most growing areas, especially around the key Minas Gerias region, and increased fertiliser usage had boosted production.
The region, which produces half of the Brazilian coffee, had witnessed poor weather patterns by the end of last year, prompting fears that this could pull down production.
Analysts said the huge crop output by Brazil could stir the market, pulling down prices on improved supply.
"We hope things will be better because the estimates by Brazil were expected to be even higher than what has come through," said Mr Daniel Mbithi of the Nairobi Coffee Exchange (NCE). "We are optimistic that prices will stabilise because there has been a lot of speculation on the Brazil crop estimates."
The Brazil estimates came as Coffee Board of Kenya officials, Coffee Research Foundation (CRF) and the Kenya Coffee Traders Association (KCTA) started a survey to establish expectations for the 2008 season.
The Kenyan coffee industry is going through one of its most difficult times where scarcity in production has forced the weekly auction to close earlier than the traditional break period that comes between July and September.
The latest debacle of short supplies can be traced back to last year when a cold spell hit most growing areas, affecting the development of berries. Besides the cold, cases of Coffee Berry Disease (CBD) were also reported in several areas especially in upper zones of Embu, Kirinyaga, and Nyeri resulting in a revision of estimates for 2007 from 53,214 tonnes to 48,710 tonnes.
Pressed by the effects of these production set backs, officials at the NCE said an early closure remained the best option because supplies had been reduced to low quality packages.
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Earlier estimates had shown that the 2008 would have been a better season with an output of about 56,000 tonnes but this looks debatable given that the expected April long rains have not performed well in some areas.
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