Robusta coffee, used by Nestle SA (NESN) in instant drinks, will probably decline from a three-month high as farmers in Vietnam increase sales from a record crop and roasters turn to milder arabica beans. Prices fell.
Futures may drop 10 percent to $1,575 a metric ton on NYSE Liffe in London at the end of March from $1,758 today, according to the median of 12 trader and analyst estimates compiled by Bloomberg. Farmers may increase sales to 30 percent of their 1.7 million-ton harvest by the Tet New Year holiday in late January from 11 percent now, a separate survey showed. This time last year they’d sold 18 percent of the crop.
Growers in Vietnam, the biggest producer, held back sales as prices slumped to a three-year low last month. Robusta rebounded, shrinking the discount to arabica to the smallest since 2008 and pushing the premium for January delivery over March to a record in London. Stockpiles in Ho Chi Minh City rose during October and November and carryover inventories in the hands of farmers were among the highest ever, Volcafe Ltd. said in a Dec. 6 report.
“Supplies from Vietnam will put futures under pressure in the next few months,” said Tran Tuyen Huan, Ho Chi Minh City-based general director of Asia Commodities Joint-Stock Co. “Now that arabica is much cheaper than before, roasters may increase use of the variety.”
Robusta dropped 8.6 percent in London this year as arabica plunged 24 percent, cutting the gap to 27.95 cents a pound on Dec. 9, the smallest since 2008. Prices in Dak Lak, the top growing province, fell 5 percent to 36,400 dong ($1.72) a kilogram, Trade & Tourism Center data show. The contract for January in London rose as much as $60 a ton above March this week, a record since the spread first traded in July 2012.
Eight respondents in the price survey conducted last week were bearish, three were bullish, and one was neutral. Growers had 120,000 tons of inventories, 45 percent more than a year earlier and the most in four years, before they started harvesting, a survey showed on Oct. 1.
Farmers sold about 185,000 tons from this crop, according to the median of 13 trader and shipper estimates in the survey last week. Even if growers sell 30 percent of their beans by Tet, that’ll still be lower than the 40 percent average in the past five years, the survey showed. Harvesting is about 65 percent complete, similar to the pace last year.
The price drop and rising costs may curb investment. Spending on everything from labor and fertilizer to electricity and water rose 15 percent to 20 percent this year, Luong Van Tu, chairman of the Vietnam Coffee & Cocoa Association, said in Ho Chi Minh City last week, citing a grower survey. Average costs reached 31,000 dong per kilogram of robusta, he said.
Farmers holding back coffee are a possible sign that “margins are not good enough,” according to Abah Ofon, a Singapore-based director of agricultural commodities research at Standard Chartered Plc. An improving global economy may also boost demand, he said in Ho Chi Minh City. Futures may average $1,900 a ton in the first quarter and $2,100 in the following three quarters, he said.
Arabica beans fell 0.5 percent to $1.097 a pound at 8:30 p.m. in Singapore after surging 3.9 percent yesterday, the most in 15 months, on speculation that roasters will use more of the variety. Robusta dropped 2 percent today after closing at $1,793 yesterday, the highest since Aug. 22.
Shipments from Vietnam fell to 61,155 tons and 80,000 tons in October and November, said the General Statistics Office. That’s down from 102,000 tons and 122,000 tons a year earlier.
Inventories of robusta in warehouses monitored by NYSE Liffe stood at 45,900 tons on Nov. 25, the lowest since at least 2002, exchange data show. That’s below the 52,000 tons a Bloomberg survey of 10 traders published in August predicted for the end of the year.
World robusta production will expand 7 percent to 68.4 million bags in the coming year, more than three times the 1.9 percent gain in demand to 66 million bags, according to Macquarie Group Ltd. last month. A bag weighs 60 kilograms.
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