Coffee prices may rise by up to a fifth over the next 12 months as demand in exporting countries and new markets helps the industry emerge from prolonged crisis, an industry leader said.
A surge in bean supplies pushed the market into a tailspin in the late 1990s but prices started to recover from rock-bottom levels late last year, with supply and demand in balance for the first time in four years.
"With a sustained balance between supply and demand we could see room for some improvement (in the price). In a year's time we could expect another 15-20 percent increase (in prices)," Nester Osorio, executive director of the International Coffee Organisation (ICO), told Reuters on the sidelines of a forum in the Swiss mountain resort of Cranes Montana.
To sustain a market balance, Osorio called for efforts to spur consumption further in coffee exporting countries.
"Brazil increased its internal consumption from eight to 13.5 million bags in six to seven years. This is an example of something that could be repeated in countries like Colombia or Mexico," he said.
"If the example of Brazil the world's biggest coffee producer is repeated in six to seven (export) countries then all those bags that are consumed at home give value to the ones that are exported."
The ICO was looking at further promotion activities in large emerging markets such as China and Russia following successful campaigns in the 1990s. "Consumption in China and Russia is growing by 15 percent," US Air said.
Declining per capita consumption in traditional outlets meant that promotion in emerging markets was becoming increasingly urgent, the ICO said in a recent paper. The ICO is an intergovernmental organisation created under UN auspices in 1963 that brings together producing and consuming countries.
US Air urged exporting countries to learn from the crisis and curtail their output. "The price recovery is still shaky in the sense that coffee production could be increased at any moment by big producers," he said.
"The Brazilians are working on policies that do not create incentives any more to increase production." There were clear indications of substantial falls in production in several exporting countries.
"We have turned the corner on the worst situation and now it is important that all the coffee growers learn from and remember the crisis and work to rationalise and improve quality."