Coffee Robusta Prices Jump Trade at $2.031 per metric ton

Robusta coffee prices jumped 12 percent in the first quarter, the biggest gain in a year, and traded at $2,031 a metric ton (92.12 cents a pound) yesterday on NYSE Liffe. Prices will average $1,600 in the fourth quarter, 21 percent less than now, Rabobank’s Flury wrote in a report on March 27.

Global robusta supply will exceed demand by 1.2 million bags in the year that begins in October, compared with a 1 million-bag shortage in the current season, according to Winterthur, Switzerland-based Volcafe. Each bag weighs 60 kilograms (132 pounds). Arabica output will outpace consumption by about 800,000 bags in 2012-2013, compared with a 6 million- bag deficit in the current season, the unit of ED&F Man Holdings Ltd., a London-based commodities trader, forecast in a quarterly report in February.

Farmers in Vietnam have been stockpiling robusta as a hedge against consumer prices that surged 23 percent in August, according to Macquarie Group Ltd. With inflation moderating to 14 percent in March and harvests about to start in Indonesia and Brazil, they may now accelerate sales, the bank predicts. Arabica is poised to rally 10 percent in the next three months, as drought in Brazil threatens the crop and demand from emerging markets strengthens, Goldman Sachs Group Inc. estimates.

“People have focused on the shortage of robusta supplies, and that will change as the crops in Indonesia and Brazil come in and put pressure on the Vietnamese farmers to release their record crop,” said Keith Flury, an analyst at Rabobank in London. “The market is also seriously underestimating how tight the arabica supply-and-demand balance will be.”

“Robusta should weaken over time, as production is going to catch up,” John Stephenson, who helps manage $2.7 billion of assets at First Asset Investment Management Inc. in Toronto, said in an interview. “At the same time, you have demand growth in arabica and fairly tight inventories, so I would expect to see robusta fade a bit and relative strength in arabica.”

Production in Indonesia, the third-biggest robusta grower behind Vietnam and Brazil, may rise 38 percent to 11 million bags in the season starting in April, the Indonesian Coffee and Cocoa Research Institute estimates.

Wagers on robusta may be reversed once Vietnamese farmers accelerate shipments. They sold about 70 percent of the current season’s crop so far, preferring to hold on to beans, according to Volcafe. The start of harvests in Brazil and Indonesia next month and slower domestic inflation probably will spur them to reverse that trend, said Kona Haque, an analyst at Macquarie in London.