Robusta coffee futures may extend a 13 percent rally in the past five days after entering a bull market as exports dwindle from Vietnam, the largest producer.
Prices may jump to $2,150 a metric ton on the NYSE Liffe exchange before the expiration of the March options tomorrow, according to Keith Flury, an analyst at Rabobank International in London. That’s 3.7 percent higher than yesterday’s close of $2,074 a ton, a 21 percent increase from the low in January. A 20 percent rally or more from lows is defined as a bull market.
Options traders increased bets on higher prices by 25 percent this month, exchange data show. Investors held 7,175 call options giving them the right to buy March coffee futures at $1,950 a ton as of Feb. 10. That’s up from 5,725 on Jan. 31, when the March contract closed at $1,836 a ton. The $1,950 strike was the most widely held call option for March.
“The market could see levels as high as $2,150 a ton due to a large bet placed on the options,” Flury said by phone from London yesterday. “The large open interest in the call option at $1,950 a ton for March has attracted futures buying.”
Robusta coffee has climbed over the past week on reduced exports from Vietnam, the world’s largest producer of the beans used in instant coffee and espresso, and roaster buying. The beans for March delivery rose 1.6 percent to $2,107 a metric ton by 12:27 p.m. on NYSE Liffe in London. The price touched $2,108 a ton earlier, the highest since Sept. 21.
The beans for March delivery became more expensive than the May contract for the first time on Feb. 9, signaling limited supplies. Beans for March delivery are $142 a ton more than May-delivered coffee.
Vietnam’s coffee exports were 112,182 tons in January, down 48 percent from a year earlier, according to the country’s General Customs Department. About 35 percent of the country’s crop had been sold before the Tet new year holiday, down from an anticipated 50 percent, according to broker Marex Spectron Group in London. The Tet festival ran from Jan. 23 to Jan. 27.
“Vietnam, the only volume supplier of robusta at the moment, is a good but disciplined seller, and demand is constant,” Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd., said in a report e-mailed last week.
The harvest in Brazil, the second-biggest grower of robusta beans, usually starts in July, data from the U.S. Department of Agriculture show. The crop in Indonesia, the world’s third-largest producer of robustas, starts in April, the USDA says.
“The high premiums in Indonesia coupled with export delays in Vietnam are also supporting the market,” Flury said.
European roasters are tapping beans stockpiled in the continent after inventories there rose to an all-time high last year. Robusta coffee 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.
Robusta coffee prices may fall again after the March futures expiry, Flury said. The current crop in Vietnam will be a record 21.5 million bags, according to Rabobank’s estimates. Harvests in other producing regions will also start and the reductions in Liffe stockpiles may slow, Marex Spectron said.
“For the moment the Vietnamese farmer can afford to be relaxed,” Marex Spectron said in a report on Feb. 3. “However, this window is closing and as we begin to roll through the coffee year this will not be the case. India and West Africa will be coming along soon, followed by Indonesia and conillons,” or Brazilian robustas, it said.
Money managers were net-short, or betting on lower prices, in robusta coffee as of Feb. 7, according to NYSE Liffe data. Prices have since then climbed 13 percent. Net-short positions totaled 6,873 futures and options, compared with 6,685 on Jan. 31, according to the exchange.