The squeeze on robusta coffee supplies which has lifted
prices to three-month high may not last for long, given the pressure on
Vietnamese growers to sell down a record harvest, and an increase in Brazilian
exports due early next year too.
Robusta coffee futures on Wednesday hit £1,779 a tonne in
London, for January delivery, up 26% from a three-year low reached in early
The price gains have been supported by a drop in supplies on
international markets prompted by a decision by producers in Vietnam, the
top-ranked robusta producing country, and Indonesia to hold back on shipments.
Stocks certified for delivery against London futures "have
fallen dramatically from over 5m bags in November 2011 to just 766,000 tonnes
in November 2013", the International Coffee Organization said in a report on
'Exports will remain
However, that discipline looks unlikely to last for long,
given the strength of Vietnam's ongoing harvest, which the US Department of Agriculture
bureau in Hanoi upgraded to 29.0m tonnes, in line with market expectations, but
4.2m tonnes above the department's official estimate.
"Given record production, exportable supplies will also be
high," the bureau said, highlighting "limited storage capacity throughout the
green coffee bean value chain".
"Despite falling prices domestically and internationally,
Vietnamese coffee exports will remain strong."
The bureau raised its estimate for Vietnamese shipments in
2013-14 to 25m bags, also a record.
That is equivalent to more than 2m bags a month – representing
a sharp pick-up from the 100,000 tonnes (1.33m bags) recorded in October, the
first month of the marketing year.
However, Vietnam is capable of exports well above that level,
with volumes in February last year reaching 168,000 tonnes.
Meanwhile, Brazil - which produces mainly arabica beans, but
is a substantial robusta grower too - is also offering a further hope to
robusta buyers, with its own hold-out against sales also likely to wane.
"Robusta coffee prices are soaring in the Brazilian market,
recovering part of losses registered over the last month," Cepea, the market
research centre linked to Sao Paolo University, said.
The price of benchmark type 6 robusta coffee rise 15% to 214.54
reais ($91.84) per bag last month, encouraged by a reluctance by growers to
sell into a rising market.
Sellers may remain "refrained" in sales, "waiting for new
price rises", Cepea added, quoting conversations with market "players".
However, a "higher volume of coffee may flow from the first
months of 2014 on".
In London, robusta coffee futures for January stood at
$1,704 a tonne in lunchtime deals, up 0.4% on the day.