Palm | Kelapa Sawit

Foods Market Outlook June 18 2011: coffee prices - Coffee prices are trading moderately below last month's 14-yr high. Below are bullish factors and Bearish factors of coffee prices.

Bullish factors include (1) the prediction from Brazil's Ag ministry for Brazil's coffee output to fall 9.5% this year to 43.5 mln bags as trees enter the lower-yielding half of their 2-yr cycle, and (2) ICO's cut in its 2010/11 global coffee output estimate to 133 mln bags from a Mar estimate of 133.7 mln bags and its statement that coffee supplies will be "tight" the rest of the year as stockpiles in producing nations stay near a 40-yr low of 13 mln bags.

Bearish factors include (1) May Brazil coffee exports up +3.7% y/y to 2.62 mln bags, (2) Columbia's prediction for a 2011 coffee harvest of 9.5 mln bags, up +6.7% from last year, and (3) ICO data that shows Mar global coffee exports rose +19.6% y/y to 10.45 mln bags.

Fundamental Outlook-Bull market correction-Coffee prices are correcting lower from their 14-yr high on favorable weather for Brazil's ongoing harvest. Coffee production in 2009/10 fell -4.5% y/y to 122.9 mln bags (ICO), but production should rebound to +8.2% y/y 133 mln bags in 2010/11 Brazil's 2010/11 (Jul-Jun) production will rise 23% y/y to 55.3 mln bags on a favorable 2-yr cycle (USDA).