Archer Sees Arabica’s Premium Over Robusta Falling About 50%

The premium arabica coffee commands over robusta beans may fall by about 50 percent as Brazilian producers have sold less of their crop and robusta stockpiles in Europe continue to fall, according to Archer Consulting.

The price difference between the two varieties may return to 40 cents a pound, the Sao Paulo-based consultancy said in a report e-mailed today. That would be the lowest since March 2009, data on Bloomberg show. The gap was at 79.4 cents a pound by 11:06 a.m. in London. Brazil is the world’s largest producer of arabica coffee and Vietnam is the top robusta grower. Arabica beans, brewed by specialty companies including Starbucks Corp., trade in New York and robusta, used in instant coffee, trades in London.

“If historical data is of any use, we see the arbitrage between New York and London firming even more to the 40 cents a pound level we saw for a long time and that could come from either a stronger robusta or weakening of arabica,” Rodrigo Costa, a coffee market specialist, wrote in the report.

Inventories of robusta coffee with valid certificates in warehouses monitored by the NYSE Liffe exchange in London were 171,380 metric tons as of May 14, down 0.7 percent from 172,530 tons two weeks earlier, exchange data show. Stockpiles have been falling since reaching an all-time high of 417,420 tons in July. Growers in Brazil have sold less of their crop than in previous years, according to Archer’s report.

Arabica coffee will probably fall to $1.60 a pound if the Brazilian currency fails to rally and rains that are hampering harvesting in growing areas stop, Costa said. The price may struggle to rise above $1.80, he said.

“With the Brazilian currency so much weaker in such little time, the Brazilian crop sold less than the average in normal years. All factors point to new lows to come,” he said.

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