Robusta Coffee Extends Surge to 4-Year High as Supply Woes Mount

Marvin G. Perez and Fabiana Batista
Mon., September 20, 2021


(Bloomberg) -- Robusta coffee prices extended a run to the highest in more than four years as concerns deepen over the supply outlook from Vietnam and Brazil, the world’s top two producers.

Robusta for November delivery jumped as much as 1.3% to $2,178 a metric ton on ICE Futures Europe.

The bean widely used in instant coffee-beverages such as Nestle SA’s Nescafe brands has surged about 55% this year after frosts and drought took heavy toll on Brazil’s crops, especially arabica coffee. That boosted demand for robusta. At the same time, pandemic restrictions, a lack of containers and soaring freight costs have made it more expensive to import from Asia, especially Vietnam, the top supplier of robustas.

Brazilian roasters “are demanding a lot of robusta as they are replacing more expensive arabicas” said Marcio Candido Ferreira, a director at Espirito Santo-based trader Tristao Cia. de Comercio Exterior. “The robusta crop is sold out” for the current season ending in June 2022.

Diminished potential in Colombia and India also eroded the supply prospects. Brazilian robusta coffee for export is trading $500 above London’s benchmark prices, when it’s usually is close to the exchange’s price, Ferreira said.

“The logistics sector estimates that the situation will only be resolved in the second half of 2022, and and until then whoever needs a product will have to pay the price of the day,” according to Archer Consulting in Sao Paulo.

“Spot coffee will start to appreciate. Whoever has product available in transit or in the main consumer markets will earn money. Price differentials should continue to increase in value and firm going forward.”

In New York, arabica prices were down with most commodities amid investor angst over China’s real-estate sector and Federal Reserve tapering. While Brazil’s coffee and sugar areas will be stressed from heat most of this week, forecasters expect steady rain starting this weekend to bring much-needed moisture.