Bloomberg News

Robusta May Fall to $1,700 as Supply Improves, Rabobank Says

February 21, 2012

(Updates with Rabobank comments starting in second paragraph, cocoa starting in eighth.)

Feb. 20 (Bloomberg) -- Robusta coffee may average $1,700 a metric ton in the second quarter, implying a 10 percent drop from the current level, on improved supplies from Vietnam and Indonesia, according to Rabobank International.

Prices rose 14 percent in the past two weeks as coffee exports from Vietnam, the world’s biggest robusta grower, failed to meet estimates. With the country set to harvest a record 21.5 million bags in the current season, the rally suggests that “the futures price has disconnected from fundamentals,” the bank said in a report e-mailed today.

“The supply situation is expected to ease in the second and third quarters of 2012 as Vietnamese exports ramp up and the new Indonesian harvest begins in April,” Keith Flury, an analyst at Rabobank in London, said in the report. “We expect prices to fall in the coming months as fundamental influences return as the market’s main price driver.”

Robusta has averaged about $1,890 a ton so far this year on NYSE Liffe in London, data compiled by Bloomberg shows. Rabobank forecast averages of $1,650 a ton in the third quarter and $1,600 in the year’s last three months. Coffee exports from Vietnam totaled 6.2 million bags from October to January, down 25 percent from a year earlier, according to the report.

Brazilian Crop

Robusta, the second-most-consumed coffee variety, is grown mostly in Asia and parts of Africa and used to make instant coffee and espresso. Rabobank also predicted lower prices for arabica beans, grown mainly in Latin America and favored by the likes of Starbucks Corp. for specialty beverages, citing expectations for an ample Brazilian harvest.

“We maintain a crop of 55 million to 57 million bags is possible given good conditions, and if this is realized, prices are expected to settle below $2 a pound in the second half of 2012,” Flury wrote. The beans will average $2 a pound in the second quarter, $1.80 in the following three months and $1.70 in the fourth quarter, Rabobank said.

Arabica has averaged $2.1918 a pound so far this year on ICE Futures U.S. in New York, according to data compiled by Bloomberg. Brazil is the world’s largest coffee producer. A bag of coffee weighs 60 kilograms (132 pounds).

Rabobank also lowered forecasts for cocoa traded in London for the current, next and third quarters on indications that crops in West Africa may be better than initially estimated. Ivory Coast and Ghana are the world’s two largest producers of the chocolate ingredient.

Cocoa will average 1,550 pounds ($2,459) a ton in the current quarter, below the prior 1,600-pound forecast, the bank said. It cut the second-quarter estimate to 1,650 pounds from 1,700 pounds and reduced the projection for the third quarter to 1,700 pounds from 1,750 pounds. That compares with about 1,481 pounds so far this year, data compiled by Bloomberg shows.

--Editors: Dan Weeks, Nicholas Larkin.

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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