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By Hereward Holland
KIGALI, Feb 13 (Reuters) - The International Coffee Organisation (ICO) forecasts global demand will stand at 130 million 60-kg bags in 2009, outstripping an expected supply of 124-125 million bags, executive director Nestor Osorio said.
Coffee prices, which are still recovering from a slump caused by oversupply a decade ago, could also remain stable or even improve, he said at a coffee conference in Rwanda's capital late on Thursday.
"We are going to see a year in which a deficit of supply could be around 6-8 million bags, consumption will be around 130 million," he said. "It will depend finally on what figures Brazil produces in April."
The No. 1 producer Brazil in January forecast output from the 2009/10 coffee crop at between 36.9 million and 38.8 million bags compared with an estimated 46 million bags in 2008.
Despite the global slowdown, the coffee industry turned over a record $15 billion dollars in 2008 compared with $5 billion in 2002, Osorio said on the sidelines of the annual Eastern African Fine Coffee Association's conference. "We haven't seen any reduction in (overall) consumption at the moment... Coffee prices could be steady, they could even recover a little bit more," he said.
GOURMET BEANS
Gourmet bean sales, however, may drop in 2009 as drinkers tighten belts against the financial crunch, Osorio said.
Price-conscious drinkers in North America, Europe and Japan, who constitute 58 percent of consumers, are choosing cheaper brands over pricy specialty varieties and increasingly brewing coffee at home, he said.
Chris von Zastrow, a Starbucks representative at the conference, said the retailer saw a 9 percent dip in high-street sales last year.
Drinkers could be choosing cheaper, lower quality coffees, he said.
"This will in turn increase the prices of lower quality coffees and because of...oversupply in higher (quality coffees) we're going to start seeing the price paid for higher quality coffees come down," Zastrow said.
Speciality high-street coffee chains are competing with fast food chains that have shaken up the sector in recent years by selling premium coffee at reduced prices, Osorio said.
"The big coffee chains in New York, or London, if that chain continues to charge a cup of coffee at $5, that (chain) is going to suffer," Osorio said.
Zastrow said it remained to be seen how the shift in demand for lower quality coffees would affect farmers' incomes and foreign exchange revenues for exporting countries.
Gourmet coffees, representing 10 percent of the market, have created an impulse for mainstream coffees to improve quality. Like wines, which are labelled with identifiable geographical regions, coffee traceability is improving standards and adding value to the industry, Osorio said. (Writing by Helen Nyambura-Mwaura; Editing by Keiron Henderson)