January 2009 Coffee Update According to the bi-annual Reuters Poll released yesterday, Arabica prices are expected to rise by 20 percent by the end of 2009. The world-wide financial crisis is expected to negatively impact the growers’ ability to spend on inputs to production (fertilizer, tree care, etc.) and labor, thus decreasing coffee outputs and enacting the always present supply/demand equation. At the same time, history shows an increase in coffee consumption during economic downturns. Yes, believe it or not, consumption rises at home consumption points, and this has been true over every economic contraction over the last forty years. Think bulk bean sales!
All polled analysts showed a bullish position on coffee. The coffee market is expected to tighten in 2009/2010, as both Brazilian and Vietnamese crops are expected to be off slightly while world-wide demand stays stable or increases. Plus, and probably most telling, major fund and investor movement into the coffee market has been made in early 2009, believe it or not! Investors are seeing these conditions and placing their money investments into “long” coffee futures contracts. The lowest “high” price in the poll was forecast to be 1.20 and the highest “high” was 2.00 p/pd.
Once again the same old record plays…if you need it and can find comfort on a forward price point, by all means we would recommend depth in availablity secured by forward contracts. Buy ahead and save your worries when and if it works for you.