Region Kenya: Coffee prices rise on quality

Prices for Kenyan coffee improved at Tuesday's auction ahead of a month-long seasonal break and thanks to better quality, an auction official said.

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The average price for all grades rose to $168.25 per 50-kg bag from last week's $167.99 per bag.

Although Kenya produces only about 1 percent of global output its beans are valued by roasters who blend them with coffee from other countries, earning the east African economy an average of some $100 million each year.

"The two main factors are that we are closing for a month and we are also seeing a bit of good qualities," said Daniel Mbithi, an official of a group that conducts sales at the Nairobi Coffee Exchange (NCE).

The auction will resume on January 13.

Beans that have been arriving for sale in the past few weeks have been from the tail end of the fly crop, which do not usually make top notch brews.

But better quality coffee from the main crop is now in the market.

"There is a bit of influx from the main crop and we are starting to see some good prices too," Mbithi said.

A total 20,335 bags were on offer and 16,570 of them sold for a total $3.4 million.

Ethiopia’s Coffee Crop May Fall 60% in Two Main Areas

Coffee output in the two main export-growing areas of Ethiopia, Africa’s largest producer of the beans, may decline 60 percent because of drought, the United Nations said.

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The lower harvest may aggravate malnutrition in southern Ethiopia’s Gedeo and Sidamo zones, where hunger is rife as a result of the drought, falling world coffee prices and higher food prices, the UN Office for the Coordination of Humanitarian Affairs said in a report today.

Production in Gedeo may fall 67 percent from a year earlier, while that in Sidamo may decline 53 percent, Tamirat Mulu, the author of the report, said in a phone interview in the capital, Addis Ababa, today. The report was based on a livelihood assessment carried out by relief agencies between Nov. 17 and Dec. 5. Ethiopia’s main coffee harvest is from October through December.

Ethiopia exported 170,888 metric tons of coffee last year. About 35 percent of that was high-grade washed coffee and 65 percent lower quality dried coffee. Sidama and Gedeo provide about 60 percent of Ethiopia’s washed coffee, Mulu said.

By Jason McLureDec. 17 (Bloomberg)

Vietnam Opens First Coffee Exchange to Boost Exports

Dec. 11 (Bloomberg) -- Vietnam opened its first coffee exchange, giving growers in the world’s biggest producer after Brazil more control in pricing beans and helping the Southeast Asian economy to boost exports from the $2 billion industry.

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Vietnam Technological & Commercial Joint-Stock Bank, Vietnam’s seventh-biggest bank, joined with the Dak Lak People’s Committee and Thai Hoa Joint Stock Co., a trader, to open the exchange today in Buon Ma Thuot, capital of the highlands province of Dak Lak, the nation’s main coffee-growing region.

The venture may help Vietnam to cut pricing discrepancies for the crop within the country, boosting farmers’ confidence in the market and ensuring a steadier supply for exports. Prime Minister Nguyen Tan Dung is trying to boost overseas shipments to counteract the slowest economic expansion since 1999.

“The exchange is definitely good for farmers because their profit margin will increase as they don’t have to go through a middleman,” said Nguyen Tuan Ha, director of the exchange.

The price of robusta, which is used in instant coffee by Nestle SA, has lost 24 percent since the end of June. Vietnam is the world’s biggest exporter of that variety, which closed yesterday on London’s Liffe exchange at $1,887 a metric ton.

At present, Vietnam’s coffee farmers deposit crops with local middlemen, who have storage facilities and sell the beans to domestic and overseas trading companies, speculators and domestic processors. The exchange, which has its own warehouse and will trade from 9 a.m. on weekdays for two hours, will compete with the middlemen if farmers opt to truck their crops to the new venture, shunning traditional purchasers.

Market Target

“The difficulty is persuading farmers to change their habits,” Ha, the exchange director, said in an interview after today’s opening. “We have to convince them the cost of transporting the beans can be well covered by improved profit margins when selling coffee to the exchange.”

The new venture may cut trading costs and offer better prices, according to Le Van Ke, general director of An Giang Joint-Stock Co., a trading company based in Dong Nai province. “It reduces the risk of farmers defaulting,” Ke said.

About 40 percent of the 1 million tons of coffee that Vietnam sells annually to world markets is expected to trade on the exchange, according to Nguyen Duc Vinh, chief executive officer of Hanoi-based Vietnam Technological & Commercial, which is 20 percent owned by HSBC Holdings Plc.

Futures Contracts

“The exchange will start with physical contracts first and we aim to handle futures contracts in 6 to 12 months,” Vinh said by telephone yesterday. Techcombank, as the lender is known, has spent about 10 billion dong ($592,000) on equipment for the exchange, Vinh said.

“Brazil has had success with their exchange that helps farmers price their product more efficiently,” said Pamela Thornton, a portfolio manager at Armajaro (USA) Inc., which runs a coffee and cocoa fund of more than $400 million.

“Farmers may not know the final price of beans shipped to New York but they know what price to ship within their country,” Thornton said in a Dec. 9 interview. “This creates a kind of transparency and price efficiency.”

The difference between prices in local exchanges in Brazil and Vietnam, and the global benchmarks in New York and London will also help arbitrage opportunities, Thornton added.

‘Good Opportunity’

“It’s a good opportunity to maximize returns” for farmers and funds, said Robin Dand, product manager for commodity derivatives at NYSE Euronext in London. Farmers can see “what price their produce is and what they’re able to obtain in the open market rather than at the farm gates.”

Vietnam’s coffee shipments totaled 853,000 tons and were worth $1.8 billion in the first 11 months of the year, a 6.6 percent increase in value from a year earlier while the volume fell 21 percent, according to data from the General Statistics Office. Commodities account for about a third of Vietnam’s exports, and coffee is the most valuable crop after rice.

Vo Sy Gia, a 52-year-old farmer who lives 70 kilometers (44 miles) from the new exchange, said he was debating whether to switch his business away from the middlemen, and holding talks with other local growers about sharing transport costs.

“I believe we would get a better price and that it’s less risky to do business with the exchange than with a middleman,” Gia, 52 said. “But I’m not sure if the profit margins will improve enough to cover the extra costs.”

To contact the reporters on this story: Beth Thomas in Buon Ma Thuot at bthomas1@bloomberg.net; Nguyen Dieu Tu Uyen in Buon Ma Thuot at uyen1@bloomberg.net; Claire Leow in Buon Ma Thuot at cleow@bloomberg.net

Region: Indian Coffee exports up 2.54 % in FY08

India’s coffee exports for the crop year (October 2007 to September 2008) has increased by 2.54 per cent at 230,910 tonnes as against 2,25,187 tonnes exported during the previous year, according to the Coffee Board statistics.

In dollar terms, the exports were up 32.09 per cent higher at $586.27 million as against $443.83 million last year. In rupee terms coffee exports have gone up by 27.45 per cent at Rs 2,427.86 crore as against Rs 1,904.95 crore realised last year.

In terms of unit value realization, exports were up 24.29 per cent at Rs 105,143 a tonne as against Rs 84,594 a tonne fetched last year. According to the International Coffee Organization, global exports in the first 11 months of coffee year 2007-08 have decreased 4.5 per cent to 86.6 million bags compared to 90.7 million bags in the same period last coffee year.

Indian coffee exports for first-nine months were also up 6.26 per cent at 184,976 tonnes as against last year’s exports of 174,077 tonnes. “After selling most of the produce, about 10-15 per cent of the coffee is left at the farms. Buoyed by high prices last few weeks, coffee growers are demanding more than Rs 200 a bag,” said B L Harish, proprietor of Blan Coffee, Kushalnagar, a farm gate trader.

Other sources however have slightly different numbers:

IRIS NEWS DIGEST: Coffee export rise 5.75% in Jan-Sep`08

As per the Coffee Board`s latest data, the coffee export from India has shown robust performance during the period of Jan-Sep, 2008 due to a significant increase in overseas sales of value-added coffee, reports Business Line.

As per the statistics, India`s coffee exports rose by 5.75% at 0.184 million tons in the first nine months of 2008 as compared to 0.174 million tons a year ago period.

There has been a quantum jump in value-added coffee exports and it will add-up in the coming months as well. The export of value-added products that largely constitutes instant coffee rose by 101% to 18,739 tons during January-September period, the Board data said.

Meanwhile, export of robusta variety rose marginally by 2.12% to Rs 92,543 tons in the review period from 90,618 tons last year. While overseas sale of arabica variety improved significantly by 19.26% at 42,461 tons, the data showed.

However, instant coffee sales plummeted drastically by 19.96% to 31,233 tons, it added.