Monday, January 16, 2012

Ethiopian coffee bonanza lifts world output hopes

World coffee output over the last two seasons has beaten previous expectations by nearly 5m bags thanks to far-higher-than-expected production by Ethiopia, the birthplace of the bean, which has overtaken Colombia.

Global coffee output in 2010-11 was 134.2m bags, more than 1m bags higher than previously expected, the International Coffee Organization said.

For the current 2011-12 season, the production estimate was lifted by 3.8m bags to 132.4m bags.

The revisions reflected a massive upgrade, totalling nearly 6m bags, in output in Ethiopia, in whose Kaffa province the bean is believed to have originated.

The 9.8m bags that Ethiopia production is now believed to have reached in 2011-12 would rank the country "as the world's third-largest producer after Brazil and Vietnam", the ICO said.

In recent seasons, Colombia and Indonesia, have been battling it out for third rank, but with both unveiling a series of sub-par crops thanks largely to excessive rainfall blamed on the La Nina weather pattern.

Investment programme

The ICO gave no reason for its massive Ethiopian upgrades.

However, the rise in production, now seen doubling in three seasons, come amid a government drive to more than double coffee output in the five years to 2015 – a campaign which has received a tailwind from high bean prices which have encouraged investment in the sector.

Indeed, the production record contrasts with a commonly-held belief that Africa is likely to prove unable to fulfil its large potential in coffee, held back by political and climatological volatility.

Ethiopia is Africa's largest coffee producer, while the bean itself is of huge importance to Ethiopia, which has more than 1m families dependent on the crop, which accounts for more than one-quarter of gross national product (GNP) and accounts for some 40% of exports.

Price move

The upgrade to the estimate for Ethiopian output offset small downgrades to production forecasts for Central America, which suffered heavy rains late last year.

Nonetheless, robusta coffee edged 1.3% higher to $1,854 a tonne in London on Monday, for the best-traded March contract.

New York commodity markets, where arabica coffee is traded, were closed for a public holiday.

Ethiopia grows overwhelmingly arabica coffee.