Coffee Market Deficit May Hit 11 Million Bags in 2008

“Jan. 15 (Bloomberg) -- The global coffee market may be in deficit of 11 million bags, or 1.45 billion pounds, next season as producing countries fail to compensate for output cuts from Brazil, the world's biggest producer, the International Coffee Organization said.

“In December, Brazil's forecasting agency Conab estimated a cut of as much as 27% in output for the country's 2007-2008 season as its coffee trees enter the low-production year of a two-year growth cycle. The ICO said today in a report that it expects global production to be 109-112 million bags, of which Brazil will account for 29%. Demand is forecast to be 118-120 million bags.

“‘Even if production in other countries were to increase during the crop year 2007-2008, it would not be sufficient to offset the shortfall in Brazilian production,’ the London-based ICO said. ‘The current supply and demand structure has reinforced the firmness in prices recorded in December and early 2007, which gives me reason to state that the recovery in prices should be maintained,’ Nestor Osorio, the ICO's executive director, said in the report.”
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Start to take long term positions in coffee because the fear of a shortage will make the price move up then the actual shortage will accelerate the price movement but by then everyone will be afraid to enter the market because the price will be too high for the risk to be taken.