Rabobank offered a little support to coffee bulls, downplaying
the risk of a collapse in prices of arabica beans, while nudging higher its estimate
for robusta futures.
The bank said that, for arabica beans, the "apparent impact"
of drought on Brazil's coffee output had become "less pronounced than
anticipated" as harvest has progressed, a factor evident in the beans' decreased
premium over robusta.
Nonetheless, the bank kept at 46m bags its forecast for
Brazil's coffee harvest, including 28.5m bags of arabica beans, saying that it
was "still too early to determine final volumes".
That estimate is in the lower-middle of the range of analyst
estimates, which spread from about 40m-55m bags, with the extent of the spread
a measure of the uncertainty.
'Impacts to linger'
There were reasons for prices to receive continued support
too, with Brazil entering a period when frosts become a risk, and with the
impact of drought expected to extend into next year's harvest.
"The impacts of the drought are expected to linger into next
season and constrain yields, which will likely limit the downside of arabica
prices," Rabobank said.
The bank stuck by a forecast for arabica futures averaging
175 cents a pound in New York in the newly-started quarter, a little above the
170.95 cents a pound at which September futures closed on Tuesday.
For robusta coffee, the bank also stuck by its price
forecast for the current quarter, of London futures averaging $2,000 a tonne, a
touch below the $2,016 a tonne that the September contract finished at on
However, it lifted by $50 tonne to $1,900 a tonne its
forecast for futures in the October-to-December quarter, and by $100 a tonne to
$1,900 a tonne its forecast for prices in the first three months of 2015.
The bank termed "supportive" the outlook for robusta prices,
"with tightening stock levels and weather risks looming".
London stocks fell to the equivalent of 54 contracts last
month, from 200 contracts in mid-May, "tightening available stocks".
And with the El Nino weather pattern, which typically causes
dryness in South East Asia, looming, "we see further downward production revisions
ahead" for major producing countries.
Robusta is produced largely in Vietnam and Indonesia, where
export data released on Tuesday from Sumatra, the country's top producing
region, showed June shipments at 6,898 tonnes, down 41% year on year.