Poor weather, weak supply of robusta coffee could trigger price rally

Workers sort through green robusta coffee beans for defects in Ho Chi Minh City, Vietnam, in this 2010 file photo.
Workers sort through green robusta coffee beans for defects in Ho Chi Minh City, Vietnam, in this 2010 file photo.PHOTO: BLOOMBERG

LONDON (Reuters) - Expectations of poor robusta coffee crops next season in major producers such as Brazil, Vietnam, Indonesia and India could trigger a price rally, traders said.

"Weather is not ideal in all of these countries," a senior European coffee trader said. Output of Brazilian robusta, or conillon, is forecast to be down this year due to prolonged dry weather in key growing areas such as Espirito Santo, and trade sources are now voicing concerns about prospects for next year's crop.

In top robusta grower Vietnam, dry weather in April and May and below average rainfall in June, augured for a drop in output in the next harvest due to start around October or November.

A late start to harvesting in Indonesia, the No. 3 robusta producer behind Brazil, is likely to erode production, while dry weather in India has scaled back expectations for robusta output there.

Monsoon rains in India were 7 per cent below average in the week ended June 22, the weather office said on Thursday, narrowing the deficit since the season started on June 8.

"All the elements are there to indicate that next year's production of robusta will be less than this year," the trader said.

Traders said robusta futures on the ICE commodity exchange could outperform arabica in coming months due primarily to the tight robusta supply outlook next season, but also because of expectations that growth in demand for robusta will outpace arabica.

"In emerging economies and producer countries demand for robusta is growing strongly, while arabica demand growth is stagnant," said Andrea Thompson, analyst with CoffeeNetwork.

Robusta futures are capped by plentiful prompt supplies of Vietnamese coffee due to a big carryover into the latest harvest, as well as ample stocks in ICE-approved warehouses, traders said.