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Robusta price eases on Vietnam export forecast

SATurday - 25/10/2014 14:58
Robusta coffee prices eased as Vietnam, the biggest producer of the bean, forecast exports this month above market expectations, chiming with ideas from brokers of a squeeze on supplies not lasting for long.

Vietnam should export 120,000 tonnes (2.0m bags) of coffee overall this month, the country's official statistics office said.

While sharply lower, by 26%, than shipments in December last year, the figure is above the 100,000 tonnes that traders have forecast.

It would also represent some recovery in shipments from November, when they came in at 80,000 tonnes, and tally with expectations that Vietnam's producers, completing a record harvest, will not for long be able to maintain the market discipline which drove futures to a three-month high of $1,860 a tonne, January basis, earlier this month.

'Amply supplied'

The rally has been supported by a tumble in stocks of robusta beans certified for delivery against London futures, a decline fuelled by weak Vietnamese exports.

Certified inventories as of December 9 were 31,420 tonnes, down 30% in two weeks, and at their lowest since February 2009.

However, many analysts have cautioned that such a squeeze may prove short-lived, and that prices are poised to fall.

Commerzbank which cautioned two weeks ago that it was "only a question of time before the expectation of higher exports would prevail on the market.

"We can therefore expect to see lower robusta coffee prices over the next few months, partly because the arabica market is likewise amply supplied," said the bank, which estimates Vietnamese production at 30m tonnes.

'Potential for switching grows'

Last week, Macquarie, which forecasts the Vietnamese coffee harvest at 29m tonnes, including 600,000 tonnes of arabica beans, forecast a "sharp robusta prices sell off" as the bumper crop reaches the market, and given a diminished arabica-robusta spread.

The arabica premium fell as low as 26 cents a pound this month, from an average of 84 cents a pound last year and 43 cents a pound earlier this year.

"At these narrower spreads, the potential for switching grows – especially for marginal roasters who can afford to compromise blends and/or taste - by moving away from hard-to-find robustas and replacing it with cheap, lower grade arabica," Macquarie analyst Kona Haque said.

In Brazil, the Conselho Nacional do Café noted talk that Vietnamese producers "sold 10-12% of the crop in the last week. and expectations are that marketing will reach 30% of the crop before the new year's holiday in Asian country", in late January.

Market prices

Robusta for March delivery closed 0.8% down at $1,691 a tonne in London, which operated a half day. That price is equivalent to about 77 cents per pound.

In New York, arabica beans for March dropped 0.9% to 114.75 cents a pound.

Source: Agrimoney

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