The premium for robusta coffee delivered in March plunged 21 percent today on speculation farmers in Vietnam, the world’s biggest grower of the beans, have resumed sales to take advantage of higher prices.
Beans for March delivery are $130 a metric ton more expensive than May-delivered coffee on NYSE Liffe in London, down from $164 a ton yesterday, data on Bloomberg show. Robusta coffee jumped 20 percent this year and entered a bull market as exports from Vietnam dropped 48 percent last month.
Prices have jumped 18 percent in the past eight days alone as the March futures contract came closer to expiration, fueling speculation that there was more interest in taking delivery of beans. NYSE Liffe yesterday said it was proposing limits on deliveries in its London commodity futures which would prevent buyers from taking more than 75,000 tons of coffee.
“We’ve seen a bit of producer selling from Vietnam today and that dragged the spread between March and May lower,” Gary Mead, an analyst at VM Group in London, said by phone today. “It’s hard to say whether this price difference will continue to fall. That will depend on whether producers continue to sell.”
The robusta coffee contract for March went from being $10 a ton cheaper than May on Feb. 8 to $130 a ton more expensive in six days. The open interest for the futures is 18 percent higher than at the same time last year, data on Bloomberg show. That is 10 working days before the first notice, when holders of contracts need to say if they intend to take delivery of beans.
“It seems like we could be in for a large delivery, with the price rises we have seen, the inversion of the March-May contracts and the current open interest,” Keith Flury, an analyst at Rabobank International in London, said by phone today. “It would be too risky of a bet if these beans weren’t already sold in the physical market.”
NYSE Liffe’s proposal on delivery limits is almost two years after a group of 16 cocoa consumers complained about a lack of transparency in the markets. The first notice for the March robusta contract is on March 1.
Vietnam’s coffee exports were 112,182 tons in January, according to government figures. Farmers there had sold about 35 percent of the crop before the Tet holiday, down from an anticipated 50 percent, according to broker Marex Spectron Group in London. The Tet festival, which marks the Lunar New Year, ran from Jan. 23 to Jan. 27.
European coffee stockpiles have been falling since July 11. Inventories with valid grading certificates in warehouses monitored by NYSE Liffe stood at 227,170 tons as of Feb. 6, down 46 percent from an all-time high of 417,420 tons on July 11, according to the exchange figures.
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.