Annual average coffee price to reach 34-year high for 2011

Coffee production will likely drop by 3.4 per cent over the last crop year, the International Coffee Organisation (ICO) reported this week. The ICO estimate global production will reach 128.6 million bags for the 2011/12 crop year, compared to 133.1 million bags a year prior. While this is a slight increase from their estimate a month ago, the organisation notes that adverse weather conditions have continues to affect production in several exporting countries. Consumption last year was 135 million bags. With no signs of demand slowing down, the drop in production will likely lead to a deficit of supply. Prices throughout the year have continued to rally on these tight fundamentals, with the average ICO composite indicator price for the first 11 months of the year at around US$2.12, the highest level in 34 years. During the month of November, the ICO report noted that price volatility decreased considerably, with the ICO composite indicator price falling by just 0.1 per cent. Africa is one of the only coffee producing regions that reported an increase in production, with output expecting to rise by 19.6 per cent to 16.3 million bags. South America reported a drop of 7.4 per cent, while Asia reported a 4.6 per cent drop. The report highlighted that global consumption had almost doubled in the last 40 years from 70.7 million bags in 1970, to 135 million bags in 2010. In the last decade, consumption has growth at an average rate of 2.5 per cent, with the steepest increases coming from exporting countries.