Milan, April 8 - Coffee output in Brazil, the world's biggest producer, is expected at about 38 million 60-kg bags in 2009/10 and may go to 40-42 million bags if weather remains favourable, the head of illycaffe said on Tuesday.
Arabica prices have pushed up on concerns about tight supply with Brazil in a lower output phase of its biennial coffee cycle, and as Colombia, the world's No. 3 producer, expects smaller crops due to its coffee tree replacement programme.
The U.S. May futures contract hit an 8-week high on Friday.
"About 38 million bags will be harvested in Brazil... but it is raining so the harvest may be bigger... up to 40-42 million bags," Andrea Illy, chairman and chief executive of Italian premium coffee roaster illycaffe told Reuters in an interview.
Illycaffe buys half of its green coffee from Brazil to make a trademark 100-percent arabica blend which is sold in more than 140 countries. A small part of supply comes from Columbia.
Illy said he expected Colombian coffee crops to come in at 11-12 million bags this year, compared to a forecast of 11 million bags by Colombia's coffee growers federation
Brazilian government crop supply agency Conab has estimated the 2009/10 coffee harvest should turn out between 36.9 million and 38.8 million bags, down from an estimated 46 million bags in 2008/09 due to an off-year in the biennial cycle.
IMPORTANT DEFICIT
Illy said with lower output in Brazil and thin global stocks -- which he estimated at 42-44 million bags meaning enough to meet demand for just 3.5 months -- global supply would come "at least" 5-6 million bags below demand in 2009/10.
"Next year we'll have a very important deficit," he said. "I see a very worrying picture."
Illy said he expected strong price volatility in the June-August period.
He said coffee consumption would not drop despite economic crisis hitting consumer sentiment, but demand growth would slow and mass-market consumers were likely to switch to drinking cheaper coffee and drinking more at home to save money.
"We are going towards 2010 with a demand of 129-130 million bags and an average production in the biennial cycle of 123-124 million bags," he said.
The coffee deficit may grow even bigger because current prices were not high enough to encourage Brazilian growers to boost output, he added.
EXPANDING IN READY-TO-DRINK
Illy said new projects would eventually boost illycaffe's green coffee purchases and his family-run company aimed to return to traditional 10-12 percent annual growth of purchases "in a year, or two or three when the general economy improves".
ILKO, illycaffe's joint venture with the world's biggest drinks maker Coca Cola launched a year ago, aims to win a 30 percent share in the premium ready-to-drink coffee-based beverage segment with its canned coffee drink "illy issimo".
The global ready-to-drink beverage market, estimated at more than $17 billion, has continued to grow despite the economic crisis, ILKO officials said.