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Shortage of Best Beans May Send Coffee Prices Higher

February 16, 1988|From Reuters

LONDON — A shortage of the choicest coffees supported world prices on Monday and manufacturers said the cost of coffee in shops and supermarkets may rise in coming months if the tightness persists.

Roasters, or coffee processors, have watched prices of high-quality "mild" arabica coffees from Central America and Kenya creep 30 cents higher per pound since October.

They are worried about acquiring the quality supplies that they need for their blends because the usual replacement coffees--such as high-grade Brazilian arabicas, a lower quality than milds--also are scarce.

"Everyone is looking at what to put in their blends without suffering a huge price increase" or sacrificing on quality, a spokesman for a leading European coffee manufacturer said. "Sooner or later roasters will have to put up prices at the supermarkets."

Highest Since November

Arabicas are the best quality coffee beans and account for roughly 70% of the coffee used, with milds the top grade. Robustas are inferior in quality and blended with the better varieties.

In London, robusta coffee futures in the May position climbed to 1,330 pounds sterling a metric ton ($1.05 per pound) Friday, their highest since Nov. 14.

That was because traders said some roasters may eventually replace some milds with robustas in their blends. Prices were well supported Monday and traded at around $1.038 per pound.

Supplies of coffees from top producers of milds--Colombia, Costa Rica, Kenya and Guatemala--are dwindling, after record exports in September depleted producer stocks, and producers subsequently shipped below their export quota shares from October to December.

Most coffee producers belong to the International Coffee Organization, which tries to bolster coffee prices by imposing export quotas. Since October, low average prices have triggered incremental cuts of 3.5 million bags of coffee from the 58-million bag annual ICO quota.

Since the cuts are distributed proportionately among ICO producers, the world's top 50 exporters, the more sought-after varieties are restricted along with the more available types.

Supply Pinch

The effect of quota restrictions, some late Central American coffee harvests, smaller crops in Colombia and Costa Rica and some voluntary producer withholding of coffee sales in hopes of higher prices also are keeping top coffees off the market.

The supply pinch has pushed the price of scarce mild arabicas above that of plentiful robustas by an average 36 cents a pound from a premium of 22 cents a month ago.

Analysts are unsure how long the tightness can last, but say supplies of quality coffee could be scant until June, after all new crop mild coffees are in the market and consumer demand has slowed seasonally for the summer.

ICO figures showing that producers undershipped their October-December quotas by 26% compounded trade concerns that some important exporters did not have the supplies to ship, analysts said.

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