Coffee Prices Continue to Rise

February 14/Nairobi, KenyaBusiness Daily -- Coffee prices rose to new highs last week, cranking up returns for marketers and cushioning farmers against a drop in supply.

The average price of various grades at the coffee auction rose 5% compared to the previous week to stand at $411, from $393.50 per bag, at the Nairobi Coffee Exchange.

Coffee marketers are optimistic of good earnings this year due to sustained strong performance of the commodity's price in key markets around the world since last year.

"We are trading at the highest prices ever; both here and around the world," said the Nairobi Coffee Exchange managing director, Daniel Mbithi.

The value of AA grade during the week rose 19% to $19.6 million, while that of grade AB rose 41% to $36.9 million.

The good returns at the coffee auction reflect good performance in the industry globally based on supply concerns caused by poor weather in key producing countries like Brazil and Colombia.

Brokers said that coffee is also benefiting from a global commodity boom that has been fuelled by increased investments in the futures market by fund managers in the developed markets.

The good run in coffee prices that has been witnessed in the last six years has touched record highs beginning this month.

The high prices recorded last week triggering high earnings among coffee brokers and farmers.

On the international market, last year returned the highest average yearly prices according to the International Coffee Organisation (ICO) records.

"The current supply/demand structure has reinforced the continued firmness in prices. Current developments in market fundamentals suggest that prices will remain firm in most of 2011," the organisation said.

The tight supply of coffee to world markets is attributed to adverse weather that has disrupted harvesting and transportation in many exporting countries.

Colombia was particularly hard hit by coffee leaf rust (CLR) and is not expected to recover soon partly due to the fact that access to treatment is limited by the high cost of inputs.

Monthly arabica and robusta coffee prices rose seven per cent last month compared to December last year according to the ICO: "World coffee consumption remains relatively buoyant, particularly in emerging countries," ICO added.

From the February 15, 2011, Prepared Foods' Daily News
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