Roasted coffee beans are displayed by an employee of a shop which sells the Arabica and Robusta varieties of coffee, in Jakarta on Jan. 17, 2007. Photographer: Ng Swan Ti/Bloomberg NewsOctober 12, 2007
Robusta coffee rose to a 10-year high in London on concern that drought in Brazil and possible floods in Vietnam will curb supplies from the world's biggest growers.
Brazil's main coffee-growing regions of Sao Paulo and Minas Gerais are unlikely to see much rain in the next seven days, U.S. weather forecaster Meteorlogix LLC said in a report yesterday.
Rain in Vietnam's southern coffee belt may mean flooding, the forecaster said.
``The weather in Brazil is dry, dry, dry,'' Jeff Cooper, an analyst at Ambrian Commodities Ltd. in London, said by phone today. The market is ``all weather driven.''
The price of robusta beans, used to make espresso and instant coffee, has gained more than 46 percent in a year, threatening to crimp profit for companies including Nestle SA, the world's largest food company. Prices for agricultural products such as wheat and soybeans have also jumped.
Robusta for November delivery, the most actively traded contract, rose $85, or 4.1 percent, to $2,150 a metric ton on the Liffe exchange, the highest since June 1997. It had a weekly gain of 12 percent.
A total of 17,383 contracts traded, compared with an average of 8,740 contracts for the contract closest to delivery over the last month. The November contract traded almost 16 percent higher than the January contract, the next closest one, reflecting concerns about supply in the next several weeks.
Global coffee exports in August fell 13 percent from a year ago as shipments declined from Brazil and Vietnam, the International Coffee Organization said yesterday.
Rolling Positions
``People are being squeezed on the front-month contract,'' Ralp Hawes, an analyst with London-based commodities broker Sucden (U.K.) Ltd., said in an interview today.
Trading of the front-month contract ends Nov. 30, with the first delivery set for Nov. 1. Investors and traders rolled over their positions and those who were short, meaning they had bet prices would fall, are buying contracts, Hawes said.
Open interest on the November contract, meaning contracts that haven't been closed, liquidated or delivered, stood at 68,306 today.
Hedge-fund managers and other large speculators increased their net-long position in New York coffee futures in the week ended Oct. 2, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 38,818 contracts on the New York Board of Trade, the Washington-based commission said Oct. 5.
`Prolonged Rain'
Coffee may be headed for a ``sharp correction,'' Ambrian's Cooper said. `` You get the merest hint of prolonged rain'' in Brazil ``and they'll hit the exit button.''
Vietnam, the world's biggest robusta grower, will probably post a 3.2 percent drop in production in the next crop year, Vietnam Coffee and Cocoa Association Chairman Van Thanh Huy said last month.
Fortis, Belgium's biggest financial-services company, on Sept. 28 cut its forecasts for supply surpluses of arabica and robusta coffee because of stronger-than-expected demand.
The market for arabica beans, used by coffeehouse operators such as Starbucks Corp., will have a surplus of 1.49 million bags in 2006-07, the bank said in a joint report with VM Group. That's about 300,000 bags fewer than forecast in August.
The anticipated surplus for robusta beans was cut by about the same amount to 1.09 million bags. One bag weighs 132 pounds.
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