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What’s Brewing in the World of Coffee?

BySaxo Bank
AuthorSaxo Bank
Published 02/14/2012, 09:10 AM
Updated 03/19/2019, 04:00 AM

The price difference between the two different qualities of coffee has narrowed dramatically during the last few weeks. While the price of high quality Arabica coffee has fallen more than six percent year to date Robusta coffee, the lower and more widely consumed quality, has rallied by 19 percent. The spread between the two, which has been averaging 3,435 dollars per metric tonne over the last year, has now narrowed to 2,650 dollars.
Arabica coffee & Robusta coffeePrices had been falling steadily into January as the outlook for a bumper crop in Vietnam, the world’s largest producer, had speculators selling themselves short in expectations of lower prices in the future. As it turned out Vietnam shocked the market when it announced that only 112,000 tonnes had been exported during January. This was down 48 percent from a year earlier and raised worries about shortages as the two other major Robusta exporters, Indonesia and Brazil, usually only begin their harvests in April and July respectively.

The rally and subsequent outperformance will undoubtedly run out of steam soon but not until short positions have been covered and food producers and trading houses manage to secure supplies. According to analysts this year's Vietnam crop is still expected to be a record and the feeling is that farmers there held back supplies in order to achieve higher prices, something that seems to have worked out spectacularly.

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