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Coffee boom cools down

Tuesday, September 13, 2011

Central America’s coffee boom could be slowing, mainly due to increased output, although long-term demand looks likely to stay strong.

A recent dip in Arabica prices is due partly to the fact that this year’s Central American crop will be the biggest in a decade. Honduras, Central America’s new king of coffee, and the number-two producer, Guatemala, will each export more than $1 billion worth of coffee this year.

In addition, the giants of the industry, Colombia and Brazil, are planning to sow record volumes, which could lead to further price cuts in 2012.

At the same time, prices remain fairly strong, following a 50 percent increase this year, compared to 2010.

Short-term, this may be a good time to sell futures, as prices could slide further by the second quarter of next year, according to some analysts.

Meanwhile, the long-term prospects for growers continue to look bright, with worldwide demand expected to continue growing, especially in big emerging markets, such as China.