March 17, 2011 / 2:25 PM / 9 years ago

Demand for sustainable coffee grows: Louis Dreyfus

ADELAIDE, Australia (Reuters) - Growth in the sustainable coffee market is gaining momentum despite supply issues stemming from higher prices, the global head of coffee at commodity trade house Louis Dreyfus said on Thursday.

“Demand for sustainable coffee continues to increase although the significant price rally has been fairly disruptive to the sustainability effort,” Trishul Mandana said.

Arabica coffee prices have doubled over the past nine months to hit a 34-year high of $2.9665 a lb on March 9, as low global stocks and a shortage of high quality beans boosted the market.

Soaring coffee prices have challenged sustainability programs as smaller suppliers default on contracts agreed at lower prices, Mandana told Reuters in a telephone interview.

“A lot of the contracts are done in advance, so many market participants that have bought sustainable coffee from smaller exporters and producers have suffered defaults, but this is a problem across the coffee market after a price rally,” Mandana said.

“We are seeing a significant reassessment of counterparty risk, a healthy outcome for the long-term growth of the sustainable coffee segment.”

Earlier this month Louis Dreyfus joined the 4C Association which provides a standard outlining social, environmental and economic principles for the sustainable production, processing and trading of green coffee.

The international trade house already sources coffee certified by other sustainability programs including UTZ CERTIFIED, Rainforest Alliance and the Fairtrade Foundation.

Louis Dreyfus trades around 8.5 million 60-kg bags of coffee annually, around 8.5 percent of the world’s coffee exports. Mandana said sustainable coffee remains a small but rapidly growing proportion of this.

“We strongly believe in the growth of the sustainability sector and view our expansion in this segment as essential to supporting our client base and our corporate social responsibility goals,” Mandana said.

Reporting by Sarah McFarlane, editing by Anthony Barker

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