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Robusta coffee prices - will they lag again in 2012?

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Robusta coffee, the type traded in London, underperformed in 2011, with a 15.2% decline.

That underperformance was both against the average commodity and, notably, against arabica coffee, the type traded in New York, which is generally considered of higher quality, and which expanded its premium to historically high levels.

The gap was encouraged by higher hopes for output of coffee from Vietnam, the major robusta producer, in an "off" season for Brazil, the major arabica producer, which has alternate higher and lower cropping years.

Output in Colombia, the second-ranked arabica producer, was disappointing in 2011 thanks to weather setbacks.

Commerzbank

"The expectation so far [for the Vietnamese harvest] was that a record crop of 22m bags will be reached. The latest information indicates a slightly lower crop volume, but an expected increase of around 9% on the previous year to approximately 21m bags.

Commerzbank forecasts for London coffee price, 2012

Q1: $1,900 a tonne

Q2: $1,850 a tonne

Q3: $1,850 a tonne

Q4: $1,800 a tonne

Forecasts for average price, near-term contract, during the quarter

Year average: $1,850 a tonne, (seen at $2,200 a tonne in 2011)

"We expect an average robusta coffee price in 2012 of $1,850 a ton. Although there is a fairly close correlation between the prices for arabica and those for robusta, robusta is likely to remain cheap relative to arabica given its more abundant availability.

"Arabica currently costs 2.5 times as much as robusta. Over the long-term average, however, Arabica – a higher quality bean than robusta – is only twice as expensive, and in 2008 the price premium over robusta was at times even below 50%."

Morgan Stanley

"Robustas [are] to provide increased competition [to arabicas].

"Robusta prices have remained under significant pressure… as prospects for Vietnam's crop improve.

"With the prospect of slowing global growth, and the arabica-robusta spread stabilising at a historically-elevated level, we expect trade-up demand for arabicas, particularly in emerging markets, to slow as we move through the first half of 2012."

Standard Chartered

Standard Chartered forecasts for London coffee price, 2012

Q1: $1,950 a tonne

Q2: $2,250 a tonne

Q3: $1,767 a tonne

Q4: $1,767 a tonne

Forecasts for average price, near-term contract, during the quarter

Year average: $1,934 a tonne

By Agrimoney.com

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