COFFEE STOCKS STILL OUTPACE DEMAND

COFFEE STOCKS STILL OUTPACE DEMAND

As is apparent to most coffee traders, there is no shortage of coffee in the world.

West German statistician F.O. Licht last week revised an estimate of 1989-90 (October-September) world coffee stocks, putting the figure at 39.85 million 60 kilogram bags, up 1.35 million bags from its 1989-90 first estimate. A kilogram is 2.2 pounds.Licht said supply continues to outstrip demand, although a limited reduction in world stocks is still in the cards.

The key for next season will be the size of the Brazilian crop, Licht said. If production is near 30 million bags, as expected by some analysts, the coffee market will have a problem. But a crop of around 25 million bags would be less of a problem as the still unsatisfactory level of world prices should keep overall output growth in check, the report said.

Consequently, Licht said the outlook is moderately optimistic, although temporary price setbacks in periods of seasonally low demand cannot be ruled out.

Looking at supply, Licht said that although no interruptions to coffee exports from the Ivory Coast have been reported amid the political unrest in that country, exports in 1989-90 (October-March) fell drastically to 820,000 bags from 1.7 million in the same period of 1988-89.

World coffee production in 1989-90 is estimated at 89.9 million bags, up from 86.4 million in Licht's previous estimate. Robusta production is estimated at 24.8 million bags, down 7.4 percent from last season, while arabica production is placed at 65 million bags, 3.6 million more than previously estimated and 5 percent more than last season's production.

In addition, the ownership of Brazil's coffee stocks is as questionable as its quality, Licht said. It has been estimated that only 2.5 million bags of coffee are of exportable quality. But trade sources said 2.6 million bags of the 17 million bag total were bought by the Brazilian Coffee Institute in the early 1980s.

An additional purchase of 4.5 million bags was financed by the Brazilian banks. If this coffee is sold at much lower prices than those at which it was bought, the banks are likely to press financial claims, Licht said.

The remaining 10 million bags of Brazilian stocks belong to Funcafe, an institution formed to support domestic prices. If these stocks are sold, there will be considerable argument over who has the right to the financial returns. Therefore, the Brazilian stock position may not be a great burden on the market, although the data are somewhat unreliable, Licht concluded.

Brazilian traders have estimated the 1990-91 crop at between 21 million and 26 million bags, much the same as last year, while the U.S. Department of Agriculture puts it at 33 million bags.