Coffee market jitters

Coffee growers are suffering because of low prices

Coffee prices have shot up sharply on markets around the world after Colombia's Coffee Growers' Federation threatened to withhold up to 10% of its coffee exports.

The threat upset an already jittery market, coming shortly before a crucial meeting of the London-based Association of Coffee Producing Countries (ACPC).

Coffee buyers are worried that growers in Colombia, Brazil and the 26 other ACPC countries could persuade non-members like Mexico, Vietnam and Guatemala to join a scheme of export quotas in an attempt to drive up long-depressed prices.

Coffee prices are at a seven-year low, and have plunged 40% since November.

Mexico and Vietnam have traditionally ... not supported this type of thing [quotas], I'm rather sceptical that they will jump in now.

Arthur Stevenson, Prudential Securities

On Wednesday they had slumped further on news that the ACPC would not meet this Monday as planned, but 12 days later on 19 May. The delay was interpreted as a sign of disunity among growers.

But if the growers meet and decide to act, prices are bound to go up sharply.

Brazil is the world's second largest coffee producers, Colombia is number two.

According to one broker, prices would go up even it just these two countries introduced export quotas "because of the size they are".

Previous attempts to set quotas have fallen apart, mostly because producers broke ranks in an attempt to cash in on higher prices.

Mexican export boom

The Mexican Coffee Council recently confirmed that it was prepared to take steps to control the supply of coffee, but did not say which measures it was prepared to take.

On Thursday the state-run council announced that its coffee exports had surged 32% during the past six months.

Mexicos is the world's fifth largest producer of coffee.

In Indonesia, meanwhile, farmers are reported to have started holding back coffee in an attempt to force up prices.

Winter worries

All eyes are now on the start of Brazil's frost season.

The coffee market, volatile at the best of times, watches every millimetre of rainfall and every rise and drop in temperature in the country's growing regions.

Rumours of cold weather snaps are enough to send prices soaring.