Coffee farmers face lower earnings as global prices drop

Future coffee production in Uganda is threatened by the decline in global prices, with the prices of all four group indicators sliding rapidly over the course of November. Experts in the industry say that the low prices are likely to discourage farmers in producing countries like Uganda from investing in coffee. This scenario might lead to drop in production volumes. The indicators include: Composite Indicator, Colombian Mild’s, Brazilian Natural and Robustas. Latest statistics from the International Coffee Organisation (ICO) show that the composite indicator price averaged 107.03 US cents/ per pound in October 2013 , posting a 4.3 per cent decrease in September, its lowest level since March 2009 . Furthermore, the composite indicator is now below its level of January 2000 when the ‘coffee crisis’ started. EICO report shows: “The monthly average of the International Coffee Organisation composite indicator price now stands at its lowest level since March 2009 , and the severe downward trend observed over the last two years shows no sign of slowing.” Price movements”In many countries, the prices received by coffee growers fail to cover the unit costs of production while at the same time the prices of basic goods, such as food and energy are rising,” the ICO report notes. Experts have indicated that coffee is the worst performing agricultural commodity of the last two years, with a downward trend that has so far shown no sign of improving. ICO report notes: “All four group indicators fell sharply over the course of the month, Colombian Milds dropped by 3.4 per cent, Other Milds by 2.7 per cent and Brazilian Naturals by 2.7 per cent, to their lowest levels since December 2008 , March 2009 and July 2009 , respectively.” The most significant decline was observed in Robustas, which fell by 4.6 per cent to 83.7 US cents per pound, their lowest level in three years fell by 18.8 per cent to 5.13 US cents/ per pound, the narrowest gap in five years. This is indicative of the increased supplies coming out of Colombia compared to Central America . The arbitrage between the New York and London futures markets, on the other hand, widened by 4.6 per cent to 43.58 US cents/ per pound, but is still relatively low compared to the last four years. Uganda’s status According to a report from Uganda Coffee Development Authority (UCDA), the situation at the local scene is not different from the international table as prices have also dropped. The UCDA counter Kiboko as at last week shows that coffee was trading between Shs1,200 and Shs1,500 per Kilogramme, down from Shs2,000 to 2,300 per kilogramme it sold in October.

Read more