"Consumption has been growing on a fairly steady basis and production has struggled to keep pace with it, so you need the higher prices to jump-start production again. You need to ration supplies. You need to either get prices high enough to have producers expand production or prices need to rise enough to flow demand. More than likely, you're going to see the producer response first." - Judy Ganes-Chase of J Ganes Consulting in New York
By Marcy Nicholson
Reuters
March 6, 2008
AVENTURA, Fla. (Reuters) - Coffee will be served and, thanks to the recent robust rally, will taste richer this time around at the National Coffee Association's conference in this coastal community.
The people who buy, sell, roast and analyze the beans that are brewed into one of the world's favorite drinks will talk about rising prices, electronic trading, and drinking trends noted by big companies like Starbucks (SBUX.O: Quote, Profile, Research) and Sara Lee Corp (SLE.N: Quote, Profile, Research).
The 97th annual convention of National Coffee Association of USA, which will run from Thursday to Saturday, comes at a time when coffee futures have been hovering at their loftiest levels in years.
The benchmark May arabica contract 1KCK8 on ICE Futures US recently soared to a 10-year high of $1.719 per lb, causing major U.S. roasters like Folgers and Maxwell House and Chock Full o'Nuts to raise their list prices for the second time within three weeks.
While many traders attribute the bull run to new money pouring in from investment funds, Judy Ganes-Chase of J Ganes Consulting in New York, who will be a conference speaker, said there is also a fundamental reason.
"Consumption has been growing on a fairly steady basis and production has struggled to keep pace with it, so you need the higher prices to jump-start production again," she said.
Ganes-Chase added, "You need to ration supplies. You need to either get prices high enough to have producers expand production or prices need to rise enough to flow demand. More than likely, you're going to see the producer response first."
Also noteworthy, this week saw coffee futures begin trading solely on the electronic screen in a shift that marked the end of a nearly 140-year history of open-outcry buying and selling on the floor of an exchange.
A representative of ICE Futures US will speak on this move, as well as what else will be coming to the exchange into which the New York Board of Trade was absorbed in early 2007.
And an independent analyst will provide a perspective on the impact these changes are having on both the market and the coffee industry.
Indeed, the futures market has been volatile of late, and many say electronic trading, which is open for business much longer than the former open-outcry session, spurs a wilder ride for commodities.
Seminars at the three-day conference will range from coffee drinking trends, quality and how fast-food chain McDonald's (MCD.N: Quote, Profile, Research) focus on coffee has affected its breakfast business.
(Editing by John Picinich)
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