A 68% growth in Indian coffee exports in 2010-2011 (1.51 mln. sacks in 2010-11 against 899,000 sacks in 2009-10) resulted from unprecedented crops and high international prices rather than emergence of new markets for Indian coffee. High prices may remain in 2011-12 because of problems with harvests of 'Arabica' coffee in Central America and Brazil. This price tendency will also affect Robusta coffee.
The natural disaster in Japan is not expected to play a major role in Indian exports in 2011-12. Exports to Japan might show a relatively small fall. In addition, it is unclear whether the disaster will cause a slump in coffee consumption.
Unusually large coffee exports are unlikely to repeat in 2011-12 the reasons being lower forecasts of coffee crops and low coffee reserves in the country.
Coffee crops in Tanzania may fall 27% in 2011-12. Tanzania is the fifth largest coffee producer in Africa. Coffee production might be 40,000 metric tons this year while last year it reached a little over 55,000 tons. Therefore, coffee crops in Tanzania might fall 27 percent. Reasons include drought affecting countries of East Africa during the ageing of coffee beans. Tanzania domestically consumes less than 3% of coffee crops it gathers from April to August. Therefore, this year crops might correspond to those of 2008-09 (when the harvest significantly fell because of a drought). Only 35,700 metric tons of coffee was gathered then.
Tanzania cultivates such coffee sorts as Arabica (accounts for 75 percent) and Robusta.
Brazil has always been renowned for production of high-quality coffee well recognized worldwide. Coffee plantations in the country prosper like prices of this product in the global market. Opium poppy producers are also doing very well in this Latin-American country. The country's government has long been fighting a plague such as drug business, but all attempts have failed so far. However, the solution of the opium poppy problem came from an unexpected place.
This year coffee prices in global markets went up so high that many drug lords decided to join the league of coffee producers and suppliers. Beginners of the coffee business explain their action by that coffee production and sales are much more profitable than drug deliveries. According to experts, most opium poppy producers decided to take up producing an absolutely legal crop. The growing method is approximately the same so beginners will avoid any agricultural difficulties.
According to analysts of the Derivatives Trading Department within the , the current market situation is as follows: in the second part of this week, prices resumed their upward movement testing the level at 260 cents per pound of Arabica again. The closest local resistance is at 280 followed, after stabilization, by a target at 300 (a strong psychological level). Major reasons for further rising dynamics still include low global reserves and insufficient production of coffee. In the long term, based on fundamental data, we forecast further rising movement of the price.
