Arabica futures to rebound on tighter supply, says Illy

NEW YORK: Arabica-coffee futures may rebound to as high as $2 a pound by year-end as global stockpiles tighten, world demand remains firm and climate change keeps production trailing demand, according to Illycaffe.

“World inventories are still very low at producing and importing countries,” Andrea Illy, chief executive officer of the Trieste, Italy-based specialty coffee company, said in an interview during the National Coffee Association’s annual conference in Charleston, South Carolina.

Next year’s Brazilian crop, the world’s largest, will enter the low-cycle of the biennial harvest, reducing the small surplus left by the bigger production this year, Illy said.

In addition, Colombia’s output, the second biggest grower of the Arabica beans, has not recovered from weather-induced losses seen in the last three years, which may leave global stockpiles in a tight situation, as demand remains resilient, he said.

Climate changes have been disrupting global coffee production, as was the case in Colombia and parts of Central America in the last couple of years, Illy said during a presentation. “It’s reasonable to expect a recovery in prices,” he said.

The closely-held company, which makes specialty coffee and sells the brand in 140 countries, had revenue of $434 million in 2010, according to its website.

Arabica coffee for May delivery advanced 1% to $1.7875 a pound on Saturday on ICE Futures US in New York, after falling to $1.7445, the lowest for a most-active contract since October 8, 2010. Still, prices are down 33% in the past year as the market anticipated Brazil’s higher yields for this year.