The price differential between arabica and robusta beans will likely remain wide, prompting more roasters to increase the share of cheaper robusta coffee in their traditional blends, trading executives said late Monday.
The spread, which is around 130 cents a pound now, has more than doubled in the past eleven months as arabica prices rose disproportionately amid tight supply. Prices nearly quadrupled in the last two years because of the supply of high quality washed arabica beans remained tight amid soaring demand, said a trading executive in Singapore.
On the other hand, given forecasts of an improvement in the supply of robusta beans in the coming season due to expectations of a good crop in Vietnam, robusta prices are expected to fall, widening the price difference between the two grades.
Arabica supplies continue to remain tight as production hasn't picked up in major arabica producers, Colombia and Mexico.
Arabica futures surged to multi-year highs above $3 a pound earlier this month due to concerns of tight supplies and strong speculative interest, with net long positions held by investment funds increasing 48% in April.
The (wide) arabica-robusta spread will remain well-supported in the months to come, said Keith Flury, a senior commodity analyst for Rabobank Group.
Trading executives in Singapore expect the arabica-robusta spread - the premium commanded by arabica beans over robusta beans - to remain above 100 cents/pound this year.
Arabica prices are set to remain high into the 2011-12 season as Brazil, the world's largest producer, moves into a low-production year in its production cycle, said Flury.
The bank forecasts global arabica production to fall 8.6% to 76.8 million tons next year, from an estimated 84 million tons this year, but expects robusta output to rise 5% to 57.5 million tons during the same period.
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