Global coffee prices trend downwards

Overtaking Uganda’s production. Uganda has been producing coffee for years and has stagnated at only 2 to 3 million bags yet Vietnam, which started growing coffee after stability returned to this country in the early 80s –is now producing 7 million bags, almost tripling, Uganda’s production.

Coffee farmers are the most troubled following a further drop in prices of the commodity — Uganda’s top export earner— globally. Uganda, the world’s tenth and Africa’s third largest producer of the commodity, is equally affected by the global price drop.
For the month ending December and the first weeks of January, global coffee prices trended downwards by 3.7 per cent.

The December collections, with the monthly average of the International Coffee Organisation (ICO) composite indicator price attracted 131.31 US cents/lb, compared 188.90 US cents/lb at the beginning of the calendar year in October.

“This brings the average price for calendar year 2012 to 156.34 US cents/lb, 25.7 per cent lower than 2011, but still higher than any other year in the last decade, although costs of production may have increased over time,” the ICO report said.

Price falls were pronounced in the three Arabica groups, with Robustas recording a smaller decrease of 1.1 per cent compared to November.

Reacting to the global trends, the chairman of National Union of Coffee Agribusiness and farm enterprises (Nucafe), Mr Gerald Ssendaula, said: “There is going to be a reduction in earnings but this will be for short time.”

He advised Ugandan farmers to counteract the coffee price instabilities by producing more volumes for the market.
“Produce more quantities, aim at maintaining the quality which will attract specialty coffee buyers and then earn a premium price,” Mr Ssendaula said.

He said Uganda has been producing coffee for years and has stagnated at only 2 to 3 million bags yet Vietnam, which started growing coffee after stability returned to this country in the early 80s –is now producing 7 million bags, almost tripling, Uganda’s production.
He cited Rwanda which is specifically producing Arabica coffee for the American market and it has done well.

However, for this to happen in Uganda, he said authorities must put up a policy which will later see the passing of a coffee law-punitive to those who don’t follow quality and standards.

Global impact
The ICO report notes the New York futures market, which reflects the situation of Arabicas, the average of the second and third positions fell by 3.9 per cent from 155.72 US cents/lb to 149.58 in December, triggering a seven per cent contraction with the London futures market.

Moreover, opening stocks in exporting countries are estimated at 15.1 million bags, the lowest level ever recorded.
Exports by all exporting countries reached 9.2 million bags in November 2012, compared to 7.9 million the previous year.
This brings total exports for the eleven months of calendar year 2012 (January to November) to 103.5 million bags, an 8.5 per cent increase on the same period in 2011.