The premium arabica coffee, favored by Starbucks Corp., commands over the robusta variety is nearing levels at which roasters may favor the more expensive beans again, according to Amsterdam-based trader Nedcoffee BV.
Arabica futures traded on ICE Futures U.S. in New York were on Feb. 8 about 44.75 cents a pound more expensive than robusta beans on NYSE Liffe in London, the smallest price difference since March 30, 2009. The so-called arbitrage was at 46.90 cents a pound on Feb. 15, the last time the two markets were open at the same time. ICE is closed today for Presidents’ Day holiday.
Some roasters switched to using more robusta beans after the price of arabica coffee reached a 14-year high in May 2011. Consumption of the more expensive beans dropped 6.2 percent in the 2011-12 season ended Sept. 30, while robusta usage gained 11 percent in the same period, Macquarie Group Ltd., Australia’s biggest investment bank, estimated in a report last month.
“The real arbitrage, including differentials, is approaching levels,” at which roasters could switch back to cheaper varieties of arabica beans “without influencing the cost price too much,” Nedcoffee said in a report e-mailed today. Differentials refer to a discount or a premium paid to obtain physical coffee in relation to the futures price.
While some more expensive types of arabica including semi-washed fine-cup beans from Brazil are fetching a premium to the exchange price, some of the cheaper varieties such as good cup and grinders’ quality beans are trading at a discount of 17 cents to 28 cents a pound to the exchange price, according to Cazarini Trading Co., a broker in Varginha, Brazil. The country is the world’s largest coffee producer.
The majority of robusta beans are trading at the same price as on the NYSE Liffe exchange, Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd. said in a report e-mailed Feb. 15. That would mean that the price difference between the two varieties currently stands at about 19 cents to 30 cents a pound in the physcial market, Bloomberg calculations showed.
Arabica demand is forecast to rebound by 1.5 percent to 75.2 million bags in the 2012-13 season that started in Oct. 1, while robusta demand will grow by 1 percent to 62.5 million bags in the same period, forecasts Kona Haque, an analyst at Macquarie in London. Vietnam is the world’s top robusta grower. A bag of coffee usually weighs 60 kilograms (132 pounds).