Financial crisis pulls down int'l coffee prices by 17 pc

LONDON: The financial crisis appears to have repercussions on the international coffee market with prices declining by over 17 per cent in the last two months, a latest report said.

"The current financial crisis has contributed to the widespread liquidation of financial securities, including contracts in commodities futures markets, leading to marked downward corrections to their value," International Coffee Organisation (ICO) said in its Coffee Market Report.

"Coffee prices fell sharply during the month of October in the context of the financial crisis, which seems to be exerting downward pressures on virtually all commodity prices," ICO said adding that in the last two months coffee prices have declined by over 17 per cent.

Despite the absence of significant changes in coffee market fundamentals, coffee prices fell significantly during October, a month that marks the beginning of the 2008/09 crop year in many exporting countries, it said.

ICO further said that the fall in prices cannot be attributed to changes in the supply and demand balance. According to report, the monthly average of ICO composite indicator prices touched the lowest level in 14 months.

Prices fell by 14.5 per cent to 108.31 US cents per lb in October from 126.69 US cents per lb in previous month. One lb is equal to 450 grams.

"Price volatility has increased slightly since September, particularly in the case of Robusta, which recorded sharpest fall in prices for the four groups of coffee," ICO said.

On London futures market (LIFFE), the futures prices have declined to 81.49 cents per lb in October from 97.50 cents per lb in September. The meltdown affect were seen on price movement and volatility of coffee rates were at 2.47 per cent in October, ICO data said.