Coffee prices may be in for a rally to beat even this summer's surge if the La Nina lives up to some of its predecessors, ABN Amro analysts have said, warning of a potential return to a production shortfall.

Brazil, the world's top arabica producer, could "see much less rainfall" next year than is needed for the good development of the 2011-12 crop if this La Nina weather phenomenon proves a significant one, the bank said.

With potential dry weather co-inciding with what will be an "off" year for Brazil's arabica crop, which operates on a two-year cycle, "it is feasible" that world arabica output will fall from a small surplus in 2009-10 "into a statistical deficit at some point in the 2011-12 season".

Robusta beans, too, already affected by dry conditions in Brazil, could see a similar deficit.

"Given the context of declining certified exchange stocks in the US and London, and the remaining possibility that a double-dip recession may be eluded then the recent rise of coffee futures' prices may look fairly mild by this time next year," ABN said in a report.

Inventories wear thin 

Coffee prices have over the last three months risen by some 19% in London, where robusta beans are traded, and by 30% in New York, which deals in arabica beans, even after a correction over the past fortnight.

London stocks of robusta beans as of August 23 were, at 21,289 lots, down more than 40% since late last year, with New York arabica inventories have dropped below 3m bags for the first time since 2003.

Flows of robusta from Vietnam, the top producer of the bean, were severely depressed by a drop in prices earlier in the year. Arabica output has been depressed by weak production in Colombia, the second largest producer of these beans.

Harvest downgrade 

ABN Amro said that La Nina, which is associated with cool Pacific water temperatures, may already be having an impact on many coffee-producing countries, with shipments of robusta beans from parts of Indonesia slumping by one-third last month from July 2009.

The bank cut its estimate of world robusta production in 2009-10 by 1.8m bags to 52.0m bags.

Arabica coffee for September delivery closed down 2.8% at 176.80 cents a pound in New York, with the better-traded December lot down 3.0% at 178.45 cents a pound.

In London, robusta coffee for September ended up 0.3% at $1,602 a tonne, with the December contract up 0.2% at $1641 a tonne.