Coffee prices on the rise

Coffee prices on the rise
By Rachel Kelly | Posted: 02 August 2011 2042 hrs

SINGAPORE: Prices of coffee in Asia have been gaining ground on the back of supply concerns.

Prices of Arabica coffee gained around 60 per cent last year and continued to gain ground in 2011, moving up around two per cent this year while Robusta coffee which is more commonly used in coffee mix moved at a similar pace.

Analysts say rising coffee prices in Asia are inevitable despite sideways pricing in the last few days.

This is on the back of changing consumer tastes in the region.

The majority of coffee consumed in Asia is primarily from Indonesia and Vietnam.

Analysts say that with a series of bad weather problems in Indonesia and Vietnam, tight supply could mean that premiums will stay until next month, or until new supply comes online from Vietnam in November.

As of now, it's good news for coffee drinkers here in Asia as analysts say that while prices have been skyrocketing, they don't expect any further substantial movement upward.

In London on the other hand, analysts are expecting prices to come down by 10 per cent from the high.

Avtar Sandhu, Manager, Asian Commodities, Phillip Futures, said: "We have to look at coffee prices from different parts of the world. If you are looking at the major coffee centres in Europe and London, we have been seeing a down trend in coffee prices since last May."

Increasing consumption in Asia is also fuelling demand and regional prices.

For example, big corporate player Starbucks is planning to open up 1000 new stores in China.

Vishnu Varathan, Asia Economist, Capital Economics, said: "Even if you assume that very favourable weather which is a surprise on the upside. And even if you see some of the speculative elements coming off, we don't think coffee will be one of the agricultural commodities that collapses - this need not apply to the rest.

"The main reason is that there has been a sustained pick up in coffee demand - especially in Asia. In the medium term, coffee looks like a commodity that is going upwards that is maintaining an upward trend. For example in China, per capita they consume less than two per cent of the coffee that the US does, and there are trends that coffee consumption is becoming the in thing."

While it takes some time for raw prices of commodities such as coffee to impact the man on the street, analysts add that for those who take their coffee with sugar, they may be hit by a double whammy as sugar prices gained almost 20 per cent this year.

- CNA/fa

- wong chee tat :)