Robusta coffee prices fell in 2013 by 14.3% on London's
Liffe futures market.
But that was far better than the 23% drop in the, more
expensive, New York-listed arabica beans, which were weighed by a strong
Brazilian harvest, and a revival in Colombian output, as trees replanted during
an anti-rust campaign matured.
Robusta has also gained demand momentum from a switch to the
bean as its discount to arabica approached 200 cents a pound in 2010-11.
But now that gap has collapsed, will that demand switch
reverse? And how will the robusta market deal with its own supply spurt, with
the harvest in top-producer Vietnam seen hitting a record?
"Since summer, robusta prices have moved in a similarly negative
fashion as arabica prices after far outperforming them for a very long period.
Forecasts for quarter
average, front London futures contract
Commerzbank forecasts for robusta
coffee prices, 2014
Q1: $1,550 a tonne
Q2: $1,500 a tonne
Q3: $1,550 a tonne
Q4: $1,600 a tonne
"Nonetheless, arabica prices remain low relative to robusta
prices when compared to their history. this should lead to a substitution of arabica
for robusta in coffee consumption.
"The recent recovery of robusta prices was largely due to
the fact that Vietnam's latest export numbers came in low despite what seems to
have been a record-high harvest. The policy of holding back is apparently
paying off, at least in the short run.
"We doubt robusta prices will be able to escape the pressure
of a plenteous coffee supply in 2014 and don't expect its price to recover
until the second half of the year – to a level of $1,600 per tonne."
"While we may revise lower our Brazilian 2014-15 on-crop
outlook in light of new crop data due January, as well as arabica demand
figures based on the recent robusta -to-arabica demand switching, we still
think arabica prices will collapse from today's levels.
"But it will take a concerted plunge in robusta futures to
trigger this first.
"We expect a sharp robusta prices sell off. The robusta fundamentals
are less bullish this year, but the temporary dislocation of stocks is
supporting the market.
"In our view, it is just a matter of time before supplies
reach the necessary homes. Hedge pressure is beginning to come through now. And
we expect the inverted Liffe robusta forward curve to eventually attract more
grading for certification."
"The premium of arabica coffee to robusta coffee fell to
multi-year lows [in 2013], hovering below 40 cents a pound.
"We refer back to 2011 when the premium of arabica coffee to
robusta coffee surged to highs, causing roasters to switch from arabica coffee
beans to robusta coffee beans instead.
"With the current situation of a low premium of arabica coffee
to robusta coffee, we might witness roasters switching back to arabica coffee
from robusta coffee, especially if prices of arabica coffee may be further
weighed by oversupply. "