PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:04 UK, 30th Oct 2009, by Agrimoney.com
Robusta coffee price poised for 20% surge

The robusta coffee market is poised to reverse its spell at the bottom of the soft commodities league, as low prices dissuade farmers from forking out on fertilizer, Commerzbank has said.

Robusta prices - which have dipped 9% this year compared with a 20% increase in their Arabica peers, and stronger rises in cocoa and sugar � are poised for a jump of nearly 30% to $1,800 a tonne next year.

The increase will be driven by a dent in production, notably in Vietnam, the top-ranked robusta country, where output could decline to 16m bags (960,000 tonnes), a drop of 14%, the German bank said.

'Maintenance neglected'

"Especially in Vietnam, the coffee crop many suffer as, on the back of low prices levels, maintenance and fertilizing of the coffee trees has been neglected," Commerzbank said.

"At currently low prices, many farmers cannot produce coffee for a profit."

The bank added: "An expanding supply should result in falling sugar and coca prices. Robusta, on the other hand, should outperform the currently much more expensive arabica [beans]."

Arabica beans, typically viewed as brewing better quality coffee, are, at Friday's price of about $1.36 a pound, worth about twice as much by weight as robusta beans, which are used largely in instant coffee.

'Shrinking surplus'

The low price of robusta has prompted calls in Vietnam for intervention to support prices, with the government considering plans to create a stockpile which producers say should reach 200,000 tonnes.

World's biggest robusta bean producers, 2009-10

1: Vietnam, 1.14m tonnes

2: Brazil, 750,000 tonnes

3: Indonesia, 500,000 tonnes

4: India, 190,000 tonnes

5: Uganda, 170,000 tonnes

World total, 3.25m tonnes

Source: BNP Paribas Fortis forecasts

Vietnam has reportedly supported similar plans to prop up rice prices.

Commerzbank's analysis gains some support from a report from  BNP Paribas Fortis earlier this week, which forecast a "shrinking surplus", to 3.94m bags (236,000 tonnes), in global robusta supplies.

However, Fortis rated potential hiccups to Indonesia's harvest, prompted by the El Nino weather pattern, as the biggest risk to supplies, pegging Vietnam's crop at 19.0m bags.

Robusta beans for January, the best traded contract, closed down 1.7% at $1,431 a tonne in London.

Arabica beans for December finished 0.9% lower at 135.50 cents a pound in New York.

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