Robusta coffee prices, set for the first annual drop in five years, may climb about 20% by March as roasters rebuild stockpiles and output declines in Brazil, the world's second-biggest producer.
Prices may rise as much as US$400 a metric tonne from current levels, said G.V. Krishna Rau, chair of India's state-run Coffee Board in a phone interview from Bangalore. India is the world's fourth-biggest robusta coffee grower.
Robusta, the bitter-tasting bean used in instant coffee, last month plunged the most in more than eight-years on concern slowing global growth will cool demand. Brazil's coffee output may drop next year as it enters a down-cycle after harvesting bigger crops for two straight years, Rau said.
"I don't think prices can go down any further,'' said Rau, who also heads the executive board of the London-based International Coffee Organisation. "Prices may not flare up, but they could surely be back to levels they were three months ago.''
The plunge may prompt roasters to rebuild stockpiles, Rau said. Rising prices may increase costs for Nestle SA, the biggest coffee producer, and Kraft Foods Inc.
Brazil's total output of coffee, including robusta and arabica beans, may drop to 40-42 million bags from 45 million bags this year, according to Brazil's Coffee Exporters Council. A bag weighs 60 kilograms (132 pounds). That may lead to a supply deficit of as much as 10 million bags next year compared with a surplus, Juan Lucas Restrepo, commercial manager at the National Federation of Coffee Growers of Colombia, said October 20.
Brazil, the world's biggest grower, mostly produces the milder-tasting arabica coffee. Vietnam is the largest supplier of the robusta variety.
Incremental Demand
"Even if incremental demand doesn't come through, the fall in production from Brazil and Vietnam will ensure there's balance in supply and demand,'' Rau said.
Robusta for January delivery fell for a third day in early London trading, losing 0.2% to US$1,816 a tonne on the Liffe exchange today. Prices have risen 13% this month, better than the UBS Bloomberg CMCI Index of 26 raw materials, which fell almost 10% in the period.
The commodity has fallen 4.6% this year, heading for the first annual decline since 2003, according to Bloomberg data.
Global coffee consumption is likely to be as much as 128 million bags this year, compared with supply of 118.2 million bags, the ICO said last week. The group reiterated its forecast for world production of 131 million bags in 2008-09, a gain of 11% from a year earlier.
"The surplus is not significant and Brazil always holds back some quantity when they have a bumper crop,'' Rau said.
Coffee production in India, Asia's third-biggest exporter, may be 10% lower than the 293,000 tonnes estimated in June because of excessive rains last month, Rau said. Exports may be little changed at 210,000 tonnes in the year to March 31, he said.
"Imports of green coffee from Vietnam and Indonesia for blending and re-exports will ensure overall export volume remain the same,'' Rau said.
The board will announce fresh estimate at the end of this month, Rau said.
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