Robusta Coffee Prices Indonesia Rise in Europe Coffee Market

Robusta coffee price Indonesian differentials shot up in Europe's cash coffee market this week as the country's export supplies dried up, dealers said on Friday.

"Indonesian trade became incredibly difficult this week with hardly any supplies being offered on the international market from origin," one trader said. "With Vietnam no alternative because of low selling, differentials just shot through the roof."

Indonesia EK-1 robusta beans were on Friday offered at $290 a tonne over London's September contract , up $110 on the week.

Traders said this was the largest weekly rise in at least the last five years.

A poor crop in Indonesia, the world's No. 2 robusta producer, means the country may cut exports by 30 percent in 2011. Asian traders also reported surging Indonesian differentials.

"There was talk of much buying of robusta stocks in Antwerp this week," another trader said. "People were anxious to get supplies from almost any robusta origin available in stocks. European stocks are cheaper than from origin but the volumes are much smaller, there is unmet demand for robusta."

Differentials from Vietnam, the world No. 1 robusta producer, also firmed but by a more marginal $10 on the week to $220 over London September.

Vietnamese farmers in been retaining stocks because of dissatisfaction at robusta futures which are well below levels seen between March and June.

"There is increasing talk about defaults by Vietnamese exporters simply refusing to deliver on previous deals and instead seeking to resell at higher differentials," a dealer said.

Indonesian and Vietnamese robusta had been offered at differentials of around $100 under London futures in March, a level both have traded around in recent years. There had been talk about Vietnamese defaults in June as coffee futures fell.

"Some Vietnamese traders want to rip up contracts and sell the coffee again at low prices," a trader said. "In these days of open trade it is easy to forget this is a communist country and you cannot seriously get legal redress there."

"Exporters which in the past have defaulted have evidently not been stopped from trading by Vietnamese authorities."

The robusta shortage has created painful cost increases for European roasters often unable to pass on price rises to powerful EU supermarket chains, traders said.

BRAZIL ALSO TIGHT

Arabica trading was also tough, with Brazilian exporters reluctant sellers because of dissatisfaction with current low New York futures and uncertainty about frost damage to the country's harvest.

New York arabica futures had surged over 5 percent on Aug. 5 on fears about frost damage but fell back this week as damage was less than expected.

"Very little Brazil fine coffee was offered this week and roasters had to had to turn to spot supplies in Europe both of Brazil and alternatives such as Ethiopian," a trader said.

Brazil MTGB fine was offered at 9 cents under New York on Friday against 14 cents under at the beginning of August.

"European stocks of Brazil and alternatives are fast selling out and I think a lot of European buyers will in the next couple of weeks start considering purchasing US certified arabica stocks in the US Gulf and New York," a trader said. "These stocks seem to be the cheapest with guaranteed quality which roasters can buy in large volumes."

Such purchases could be commercially viable because of cheap eastbound container shipping rates on the North Atlantic because of low US exports to Europe, traders said.