Robusta coffee prices to fall on excess Vietnam supply

LONDON (Commodity Online) : Rising coffee prices, especially to robust coffe, is likely to ease soon as major producer Vietnam vowed to supply more to global markets.
According to Commerzbank, Robusta prices however showed little immediate negative reaction to official data showing that Vietnam's coffee exports soared 22% this month, compared with a year ago, with shipments revised upwards for January and February too.
London's best-traded May robusta contract gained 1.5% to $2,608 a tonne in morning trade.
However, the resilience in robusta – the cheaper coffee variety – was down to the high price of arabica - the New York-traded bean which is generally considered of better quality – and which would not for ever provide support, Commerzbank said.
"Rising exports indicate a very good harvest, so there should be no shortage of robusta beans," the bank said.
While price differentials were likely to shift some buyers to robusta to arabica, mopping up some of the rising supplies, "the plentiful supply of robusta beans will lead to a fall in robusta prices in the medium term".
However, some other analysts remain more cautious over forecasting a fall in robusta prices, with soft commodities specialist Judith Ganes-Chase noting a drop in output this season from Indonesia, the second-ranked robusta producer, and caution over the 2011-12 harvest in Vietnam.
"Some areas have been too dry, which is starting to worry farmers that next year's crop could be impacted," she said, noting "mixed views" over Vietnamese production.
Drought concerns have centred on Daklak, Vietnam's top coffee-growing province, where a seasonal dry spell ahead of rains which typically arrive in early May has seen soil moisture levels fall lower than normal during the critical flowering period.
Vietnam's official statistics office pegged coffee exports at 150,000 tonnes, (2.5m bags) this month, some 30,000 tonnes more than traders had expected, with the figure for February revised upwards by 60% to 144,000 tonnes.
The January figure was also lifted, for a second time, raised by nearly 50% to 215,500 tonnes. The initial figures had provoked talk of Vietnamese farmers stockpiling beans, in hope of higher prices.
However, it now appears that exports so far in the 2010-11 season, which began in October, have reached 13.3m bags, up 28% year on year.

(Source: http://www.commodityonline.com/news/Robusta-coffee-prices-to-fall-on-excess-Vietnam-supply-37628-3-1.html)