- Traders closely monitoring rain in world’s top robusta grower
- Narrowing July-September price gap signals tighter supplies
Robusta coffee climbed to the highest level in almost nine months as a drought in top grower Vietnam threatens next season’s crop. The gains helped extend the arabica variety’s longest winning streak in decades.
Dry weather remains fairly widespread in Vietnam, the world’s largest producer of the robusta variety used to make instant coffee. That’s threatening the development of the crop that starts there in October. Production in the 2016-17 season will probably fall to the lowest since 2012-13, according to a Bloomberg survey of eight traders published earlier this month.
A smaller crop in Vietnam comes at a time Brazil, the second-biggest robusta producer, is reaping less due to dry weather, tightening global supplies. The harvest in Indonesia will also be cut, with drought in several growing regions spurring speculation of potential shortages, according to the International Coffee Organization in London.
“Rains are being closely monitored in Vietnam and Brazil, with the first in need of heavier and constant precipitation to replenish the reservoirs," Rodrigo Costa, director of the coffee desk at Societe Generale SA in New York, said in a report e-mailed late Monday. “In Vietnam, stockholders are feeling good about their decision of waiting for better prices.”
Arabica futures for July delivery climbed for a 10th day, the longest streak of gains since at least March 1980, according to data compiled by Bloomberg. They rose 0.6 percent to $1.3445 a pound in New York. Robusta for the same month climbed as much as 1.3 percent to $1,707 a ton on ICE Futures Europe, the highest since Aug. 19, before trading at $1,703 a ton by 11:16 a.m. in London.
The robusta price gap between July and September futures has also been narrowing, a sign that supplies, while still comfortable, might be starting to tighten. Futures for July delivery were at a discount of $12 a ton to the next futures contract, up from a discount of $15 a ton a week ago, ICE data showed.
Robusta prices have risen in the past six weeks, the longest winning streak since 2011. That has prompted farmers to boost sales, according to Costa and Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd. Vietnam’s exports of the beans surged 36 percent in the first four months of the year, according to customs data.
If prices keep rising, "we might see a more linear shipment of robustas," Costa said.
In other markets:
- White sugar for August delivery fell 0.7 percent to $477.30 a ton in London as raw sweetener for July dropped 1.2 percent to 16.69 cents a pound in New York.
- Cocoa for July slid 0.6 percent to 2,145 pounds ($3,106) a ton in London as the New York contract was little changed at $2,926 a ton.