Bloomberg News

Robusta Coffee Demand Seen Rising by 5.5 Million Bags

June 27, 2012

Global robusta coffee demand may rise by about 5.5 million bags this season, boosted by consumption in emerging markets and producing countries as well as a shift from arabica beans, according to Holland Capital LLP.

Consumption in Brazil will rise by 1.5 million bags, while Vietnamese demand will climb by 500,000 bags, Euan Mann, a partner at the London-based agricultural fund, said at a conference in Geneva today. Coffee consumption in emerging markets is set to gain another 750,000 bags and usage in producing countries other than Vietnam and Brazil will account for 750,000 more bags. About 2 million bags of demand will arise from a shift away from arabica beans, he said.

“There has been general demand growth at origin countries and the increase in the last couple of years is a response to the wider arbitrage between New York and London,” Mann said in an interview at the World Coffee Outlook Conference. “We had a wide arbitrage for about a year before the switch to robusta started to occur,” he said, referring to the difference in prices between arabica coffee traded on ICE Futures U.S. in New York and robusta beans traded on NYSE Liffe in London.

Robusta beans, harvested mainly in Asia and parts of Africa, are used in instant drinks. Arabica, grown mainly in Latin America, is favored for specialty drinks such as those made by Starbucks Corp.

Vietnam Crop

Robusta coffee supplies will be about 2 million bags greater than demand in the 2011-12 season that started in October, Mann said. The crop in Vietnam, the biggest robusta producer, will be 24.5 million bags, up from 20.3 million a year earlier, he estimated. In Indonesia, the third-biggest robusta grower, farmers will harvest 7.4 million bags of the variety in the 2012-13 season that started there in April, up 2 million bags from a year earlier, he estimated.

Farmers in Brazil, the world’s biggest coffee producer, will harvest 16.5 million bags of conillons, as robusta beans there are known, Mann said. That compares with 15 million bags in 2011-12, according to the fund.

The development of El Nino weather conditions could warrant “significant concern” for production in Vietnam and Indonesia in 2013-14, he added. A bag of coffee weighs 60 kilograms (132 pounds).

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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