Coffee bean prices last week hit their lowest level since 1993 at US$0.60 per pound, brushing production prices in many producer nations. With world coffee consumption stable but output growing steadily, there is no end to the price-depressing glut in sight.
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Global coffee consumption has remained steady at 103m bags in the last few years, but production has regularly outstripped demand and is forecast to reach an all-time high of 115m bags this year. Much of the increase in supply derives from relative newcomers to the coffee-producing superleague, notably Vietnam, which last year eased up into second place behind Brazil. Vietnam is expected to produce 13m bags this year, a sharp increase on the four million bags produced in 1995. Most of this output will be available on the world market as, ironically, coffee consumption is not high in Vietnam.
Driven by Brazil, the Association of Coffee Producing Countries has initiated a retention scheme to withhold beans from the market in a bid to drive up prices. However, few analysts believe the scheme will work. Arthur Stevenson, coffee analyst with Prudential Securities, commented: “The Association of Coffee Producing Countries’ export retention plan has, so far at least, been largely irrelevant as a price-making tool [and] we are sceptical there will be any change in this regard.”
Significantly, this is the third attempt by coffee producers to form a cartel to influence the market, and seems doomed to fail like its predecessors.
For a just-food.com analysis of the Association of Coffee Producing Countries’ retention scheme, click here.
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