INTERVIEW-Low coffee prices add to climate change threat - illycaffe

by Reuters
Wednesday, 4 May 2016 17:15 GMT

Coffee flows into an illy cup at a coffee shop in Rome, Italy, May 3, 2016. REUTERS/Alessandro Bianchi

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"Prices are too low to adapt coffee agriculture to the new climate change and higher quality demanded"
  • Emerging markets to drive growing demand for arabica
  • Arabica highly sensitive to drought, excessive rainfall
  • Urges shared information on research into bean varieties

By David Brough

LONDON, May 4 (Reuters) - Low arabica coffee prices are making it more difficult for growers to adapt to changing climatic conditions, raising the prospect that already low global stocks could be further depleted, illycaffe president Andrea Illy said on Wednesday.

Illy told Reuters he was calling for a global action plan to tackle the threat to arabica coffee supply including the sharing of research on varieties more resistant to disease and drought.

"Prices are too low to adapt coffee agriculture to the new climate change and the higher quality demanded by the market," he said in a telephone interview.

Benchmark arabica coffee futures were trading around $1.19 per lb on Wednesday, a decline of around 60 percent from peaks set five years ago.

Illy said climate change risked curbing arabica production as cultivation of the beans was very sensitive to even small shifts in temperature, and to changes in water resources.

Drought risks damaging arabica flowering, while too much rain increases risks of disease such as leaf rust, which ravaged trees in Colombia and Central America a few years ago.

"Coffee is a very delicate crop because of the extremely narrow climatic conditions in which it can be cultivated," Illy said.

Trieste-based, family-owned illycaffe, which has arabica coffee retail outlets around the world and serves hospitality businesses, has annual revenue of more than of 400 million euros ($460 million).

Illy said that global consumption of arabica, used in high quality coffee blends, would grow strongly over the next 20 years, driven by demand in China, India, Africa, the Middle East and eastern Europe as incomes rise.

"Coffee consumption grows with economic development and globalisation," Illy said, adding that demand was saturated in wealthy OECD countries.

The company on Tuesday announced the appointment of a CEO who was from outside the family for the first time, Massimiliano Pogliani, who had previously worked for Saeco and Nespresso.

"This company (illycaffe) is growing and getting more complex," Illy said. "Professional management is needed."

It plans to add 30-40 mono brand retail outlets internationally this year to the current 230, Illy said.

The company has no plans to be listed, he added.

($1 = 0.8702 euros)

(Reporting by David Brough; Editing by Nigel Hunt and David Evans)

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