Market Speculators Could Be Affecting Coffee Prices

September 12, 2008

MANAGUA Nicaraguan coffee producers should be wary of rising coffee prices that may be unrealistically inflated due to speculative buying by commodity investors, said Henry-Dunlop, president of New York-based Atlantic USA Inc. Dunlop spoke last week at the Ramacafe coffee industry conference in Managua, an annual industry event that attracts the region s biggest names in coffee. At the conference, some 400 industry leaders discussed the rising prices of coffee, which has been accompanied by rising costs.

(Coffee prices) are more or less at a good level. But costs have increased and prices are due in part to investor funds, said Dunlop, whose Atlantic USA Inc. is part of commodity giant ECOM Agroindustrial.

The company s Nicaragua subsidiary, Exportadora Atlantic SA, was founded in 1997 and now dominates more than onethird of the market share here with two regional offices, 40 buying stations and nine dry mills.

Dunlop, who also serves as chairman of the U.S. National Coffee Association, encouraged coffee producers to study how investment funds in the commodity market are affecting coffee prices, so as to prepare themselves for future changes in coffee prices.

– Investment funds are a fact in our systems, we can t deny them, he said.

Last year, the price of a quintal of coffee (about 100 pounds) reached $120, suggesting coffee prices have recovered from the slump of past years. But the price increase came amid a global food crisis in which growing demand for food competes with growing demands for energy in the form of crop-based biofuels in turn sending commodity prices spiraling upward.

Market speculators who watched the global food crisis unfolding, injected millions into the global commodities market, which may have inflated world crop prices, including coffee, said Dunlop.

More worrisome still is the rising cost of coffee production, Dunlop said. The costs of fertilizers, pesticides and energy have gone up by as much as 25 percent in recent years, according to conference attendees.

Coffee continued to dominate Nicaragua s export sector in 2007, with $183 million in exports. This year, coffee exports are on track to surpass that amount with an even greater harvest.

Blake Schmidt

 

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