Trieste, Italy, Nov 12 - World coffee markets will see a deficit and price recovery in 2009/10 as output in main producer Brazil will fall but demand will keep growing, the head of International Coffee Organization said on Wednesday.
"We can foresee that there will be a deficit of production in 2009/2010. Not a very substantial one, but there will be a deficit," ICO Executive Director Nestor Osorio told Reuters in an interview on the sidelines of a coffee conference in Trieste.
Osorio said it was too early to give more precise forecasts about next year's output before Brazil gives its first official estimate of the next crop in early December.
Brazilian output is expected to fall in 2009/10 after a big harvest this year, estimated at between 46 and 50 million 60-kg bags, due to a downturn in its bi-annual growth cycle. Osorio said additional output cuts may come from some producing countries where farmers had problems finding funds because of the credit crunch while input costs, such as fertilisers prices, increased.
But coffee demand would maintain its current 2 percent growth despite the global financial crisis, he said.
"I do not see any major changes in the demand side, (two percent growth) is sustainable ... Coffee is not a car," he said.
PRICE RECOVERY
Osorio said low coffee stocks -- which he estimates at 21-22 million 60-kg bags held by importers -- would contribute to the deficit situation next year and help wind up prices.
"Of course, if there is a deficit, there should be room for (price) recovery," he said but declined to give more precise forecast.
Coffee prices dropped recently after investment funds reduced their exposure to coffee and other soft commodities.
Osorio said the funds' exit has helped to reduce market volatility, albeit at lower price levels, and the market is now driven more by fundamental factors of supply and demand than by speculation.
Osorio confirmed his forecast of world coffee production in 2008/09 of around 131 million bags -- an increase of 11 percent compared with 2007/08 -- and of consumption of about 128 million bags.