Low world coffee prices hurt producers

By Our Staff Reporter

HYDERABAD, AUG. 5. With coffee prices down to 30 year lows in New York and London markets and likely to fall even further in the coming months, the focus is now on the need to do `something' to correct the demand-supply imbalances that have led to the current situation.

While recognising that urgent steps are required to correct the situation, experts in the field indicate that this would have to address the issue of excess production, and secondly on how to increase consumption levels in at least countries where they see a potential.

In this scenario, Mr. Ian Breminer, Managing Director of Complete Coffee Limited, London, and a past chairman of Committee of European Coffee Associations (CECA) and past acting president of European Coffee Federation, feels that there is an urgent need for a `debate' on the issue by all members of international coffee organisations (producers and consumers), coffee bodies, multinational corporations, major dealers and the International Monetary Fund and the World Bank.

Speaking to presspersons here Mr. Breminer said the situation was serious for all coffee producing countries, with an oversupply of an estimated 15 million bags worldwide. Columbia and African countries are in dire straits. Brazil and Vietnam (with low product cost) are the only two countries making profit out of coffee, he says.

Mr. Jonathan T. Feuer, President and CEO of L. M. Zuckerman and Company, New York, said Brazil could face the situation and be competitive still because of a 25 per cent depreciation in its currency. Raw material costs had come down 25 per cent in the last one year, and 30 per cent over 18 months. However, the pessimism would not hit the `soluble coffee' area, he felt.Both Mr. Breminer and Mr. Jonathan are collaborator and directors on the board of Continental Coffee (CCL) which has a 3,600 tonnes annual capacity plant to make instant/soluble coffee in Guntur district of Andhra Pradesh.

Mr. C. Rajendra Prasad, MD of CCL, said the company had actually achieved a turnaround during these difficult times. For the first quarter of this year, it posted an income of Rs. 8.35 crores and net profit of Rs. 2 crores. Though revenue had fallen, production was maintained when compared to the corresponding quarter.

The company has drawn out a business plan to achieve Rs. 100 crore turnover as against Rs. 61 crores in March 2001. Declining raw material costs has helped the company, and in six months it is planning to enter the domestic market in a big way. It is also entering new markets in Europe and pitching for business in Australia and New Zealand.

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