Bloomberg News

Robusta Coffee Premium Vanishes as Vietnamese Sales May Rise

February 20, 2012

(Updates with analyst comments starting in third paragraph.)

Feb. 20 (Bloomberg) -- Robusta coffee for March delivery erased its premium to the May contract on speculation farmers in Vietnam, the world’s biggest grower of the variety, will accelerate sales to take advantage of higher prices.

March-delivery beans and the May robusta contract both traded at $1,978 a metric ton by 4:47 p.m. on NYSE Liffe in London, data compiled by Bloomberg showed. March robusta reached a record-high premium of $208 a metric ton on Feb. 15, according to the figures.

“Origin hedging has been evident in the current rally as growers and exporters take advantage of high futures prices to lock in margins,” Keith Flury, an analyst at Rabobank International in London, said in a report e-mailed today.

Robusta jumped 14 percent in the two weeks before this week as supplies from Vietnam were lower than first estimated. Shipments of 6.2 million bags from October to January were down 25 percent from a year earlier, Rabobank said. They plunged 48 percent in January alone, according to government data.

Robusta may fall further in the second and third quarters, Rabobank said, citing expectations of improved supplies from Vietnam and Indonesia. Vietnam is set to harvest a record 21.5 million bags in the 2011-12 crop year, the bank estimates. The harvest in Indonesia, the third-biggest robusta grower, usually starts in April.

“Further origin selling is anticipated in the coming months, and this hedging pressure will likely occur without the short-covering that has been supportive, implying prices will correct lower,” Flury said. Short-covering denotes purchases made to close out bets on lower prices.

A bag of coffee weighs 60 kilograms (132 pounds).

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


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