ICO raises 2010-11 coffee crop estimates to 134.6m bags

LONDON (Commodity Online) : The International Coffee Organisation raised its coffee production estimates by 1.6m bags to 134.6m bag for 2010-11, representing a rise of 9.6% over the previous season.

Coffee experts lifted their expectations for world production of the bean despite forecasting a dive in Indonesian output, thanks to heavy rains, and warning that Colombia's dire spell has further to run.

The upgrade came despite a warning of a small decline in the harvest in Vietnam, the world's second-ranked coffee producer, and 16.5% tumble in output from Indonesia, which overtook Colombia in 2008 to become the world's third-biggest coffee producer.

"Production is expected to decrease slightly in Vietnam and significantly in Indonesia as a consequence of adverse weather," the London-based organisation said.

Colombia's chances of regaining third place have also been dashed by rains which meteorologists have linked, like the South East Asian downpours, to the La Nina weather phenomenon.

"An increase in production is expected," the ICO said, forecasting an 11.1% rise to 9.0m tonnes in output.

"However, the coffee industry is still experiencing difficulties, particularly as a result of the outbreak of disease."

Such maladies, notably the potentially fatal fungal infection of coffee rust, "may delay a return to the country's normal production levels".

Colombia's output stood at 12.5m bags four years ago, before a series of weather setbacks and the impact of replantings set the country on course for its strong of disappointing harvests.

"Colombia will find it difficult to recover its former production level since many coffee trees have been affected by coffee leaf rust and access to appropriate treatment is limited by the high cost of inputs," the organisation added.

However, this list of production setbacks had been more than offset by brighter hopes for Brazil, the top coffee grower, and major African producers such as Ethiopia, Tanzania and Uganda.

While the ICO declined to expand on its reasoning, many African coffee growers have enjoyed stronger rains, after suffering a drought-afflicted 2009-10 season. Auction sales in Kenya jumped 50% in the last three months of 2010 to 133,910 bags, the Nairobi Stock Exchange revealed on Wednesday.

The ICO report also noted that almost all the rise in coffee output would be concentrated in arabica beans, the type most popular in Africa and Brazil, and which are traded in New York.

Growth in production of robusta beans, more popular in South East Asia, was set to rise by only 1.9%.

Nonetheless, the ICO said that market fundamentals continued to favour "the support of high price levels", which set multi-year highs on futures markets.

"Adverse weather is still disrupting harvesting and transportation in many exporting countries and affecting short-term coffee supplies," at a time when demand was "relatively buoyant".

In New York, arabica beans for March touched 242.95 cents a pound, the highest for a spot contract in 13 years.

London robusta beans for March hit a two-year high of $2,175 a tonne before losing some ground to close at $2,162 a tonne, up 2.8% on the day.