Coffee Supply Crises on Horizon for 2007

LESSONS LEARNED

Given the expected growth in world consumption, coffee producers will need to keep output apace with demand, said CoffeeNetwork's Thompson. "The challenge is to ensure production rises simply absorb demand -- rather than exceeding it," she said.

Indeed, coffee farmers are still reeling from a crisis earlier this decade when abundant coffee production had depressed NYBOT's benchmark futures price well below $1 a lb for several consecutive years, forcing thousands of small-scale farmers to stop growing.

From July 2000 through December 2004, the NYBOT's nearby coffee futures contract had ranged between 42 cents and $1 a lb, according to exchange data. The last thing coffee producers want is a price of 42 cents per lb -- well below the cost of production.

"There are ways and means to hedge future production into the market. But that is costly, and I would say most coffee farmers are still heavily in debt," said Veit.