20100115

DAR ES SALAAM (Reuters) -- Tanzanian coffee prices spiraled upward as supply dwindled towards the end of the season amid heavy demand from exporters, traders said on Friday.
The state-run Tanzania Coffee Board (TCB) said 8,950 60-kg bags were offered for sale at Thursday's auction with 7,463 bags sold. At the last auction on January 7, 6,303 60-kg bags were up for sale with 5,156 bags sold.

"The overall average price at the Moshi exchange was up by $10.37 per 50 kgs for arabica coffee and robusta coffee was up by $9.51 compared to the last auction," TCB said in a report.

East African coffee is normally packed in 60-kg bags but the prices are quoted for quantities of 50 kg.

Benchmark grade AA sold at $250 to $161 per bag, compared with $225.80 to $188.40 at the last auction and fetched an average price of $234.42 per bag, up from $222.26 previously.

Grade A fetched $229 to $150 per bag compared with $226-$160 per bag at the previous sale, and got an average price of $216.22 compared with $213.04 at the last auction.

"$250 per bag is a fantastic price ... I think the prices will continue to go up in the coming weeks, said Eliot Bentzen, a coffee exporter.

"Prices usually go down towards the end of the crop season because the quality of the crop also declines, but we've seen prices going up now because supply is very tight," he said.

The coffee board said the current season was likely to end in March with the new crop arriving in September.

"The demand for coffee from exporters is so huge, the coffee season could end even before March because stocks are running out," Adolph Kumburu, director general of TCB, told Reuters.
Kumburu said due to the biennial nature of the crop, coffee trees produced less this season after a good harvest the previous season.

"We expect coffee prices to keep on rising because there is a lot of competition from exporters who are fighting to meet their shipment commitments," he said.

Tanzania mainly produces arabica coffee, which follows New York, and grows some robusta coffee, which follows London.

TCB forecasts the 2009/10 (June/April) crop will fall to 50,000 tonnes in the continent's fourth-largest coffee grower -- after Ethiopia, Uganda and Ivory Coast -- compared with 68,331 tonnes in the last season.

The auction was held on Thursday and TCB issued the results on Friday.