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Brazilian robusta coffee prices hit 3-year high, helped by Vietnam lockdown fears

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Robusta coffee prices in Brazil hit their highest in nearly three years, as rapid marketing by producers eased worries over outstanding selling pressure, and Covid-19 restrictions in Vietnam spurred short-term supply worries.

 

Brazilian robusta coffee value rose by 2.2% on Tuesday to R$392.33 per bag, according to Cepea, the research institute attached to Sao Paulo University.

 

That took to 7.8% gains this month, and represented the highest price since October 2017.

 

That comparison is flattered by weakness in the Brazilian real, which boosts the value in local terms of assets traded globally in dollars.

 

However, even in dollar terms, robusta prices, at $71.75 per bag, reached their highest in six months.

 

‘Concerns about supply’

The headway reflects “concerns about coffee supply, after the new social distancing advice in Vietnam, because of the Covid-19 pandemic”, Cepea said.

 

Vietnam, the world’s top robusta producer, reimposed some lockdowns and restrictions after a renewal in Covid-19 cases in late July, after 99 days apparently clear of the virus.

 

However, the institute highlighted too that a rapid pace of producer coffee selling, as identified last week by analysis group Safras e Mercado, had been particularly strong in some robusta-growing areas.

 

‘High volume of crop traded’

As of Friday, “a high volume of the robusta crop had been traded”, said Cepea, adding that “liquidity in the Brazilian spot market has been higher than that for arabica coffee since the beginning of the harvesting.

 

“As prices started to increase in late July, the trading pace stepped up,” reaching 45-50% in the top robusta-growing state of Espírito Santo, a survey by the institute showed.

 

In Rondônia, “70-80% of the 2020-21 crop has been sold”.

 

This compares with a 40% figure in terms of the proportion of Brazil’s 2020 arabica harvest already marketed, according to Cepea.

 

Timing factor

Safras e Mercado last week that Brazilian farmers had sold 51% of their overall coffee output as of August 10, compared with a five-year average pace of 37%.

 

A rapid pace of forward sales is often seen as positive for prices, in indicating less outstanding selling pressure for the market to absorb ahead – after a bumper 2020 Brazilian harvest of both arabica and robusta beans.

 

ADM Investor Services reported the Safras e Mercado data as offering a “boost” to prices in signalling “that there will be less-than-normal hedge selling over the rest of this year”.

 

Blossoming starts

Cepea added that while Rondonia robusta sales were now expected to slow, “based on the high volume already marketed”, the pace of Espírito Santo selling may be supported by confidence in 2021 harvest prospects, after a start to the blossoming from which next year’s cherries will form.

 

“In Espírito Santo, growers may be more interested in closing deals in the spot market, since flowers started to open,” the institute said, noting that its sources report “that moisture is high and favourable” in the state.

 

“In Rondônia, higher rains are still needed for more flowers to open.”

 

Cepea reported Brazilian arabica prices as of Tuesday at R$576.84 per bag, up 2.8% for August, and at their highest in three months.

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