Robusta coffee futures rallied, as supplies from Vietnam and Brazil, the first and second ranked growers respectively, tightened.
Vietnam exported 158,500 tonnes of coffee in June, down 2.2% from May, according to customs data.
This came in below market and government expectations, with the government seeing shipments at 160,000 tonnes.
Exports from Vietnam, which overwhelmingly favours robusta production, are still up 32% far this season.
The heavier exports represent a drawing down of heavy stocks that accumulated last season, as farmers were reluctant to sell due to the low robusta prices.
But the slowing down of exports comes amid ideas that those inventories have almost been depleted.
The Wall Street Journal on Wednesday carried reports from Vietnamese coffee traders, that suggested stocks were down to 10% of preceding harvest, compared to 20% at this time last year.
The next Vietnamese harvest, which will begin in October, is expected to be smaller due to dry weather associated with the recent El Nino.
Falling Brazilian output
Brazil’s Council of Coffee Exporters, CeCafé, reported a 11.7% year on year fall in June total coffee exports to 2.38m bags, thanks to plummeting robusta shipments.
Exports of robusta, a lower grade of coffee which is blended with arabica, primarily for reasons of economy, were down 79.5% year on year, to 83,303 bags, outweighing a moderate rise in arabica exports, up 2.6% year on year to 1.98m bags.
Robusta supplies from Brazil have been under pressure since late 2015, and the situation has been exacerbated by dry conditions in Espirito Santo, the main robusta producing state in Brazil.
Brazilian consultants Safras & Mercado warn that losses to robusta areas may be worse than expected based on early drying results.
And although robusta prices are rising, they still remain well below arabica prices.
This means that roasters will continue to include robusta in their blends, in order to keep costs down.
“This arbitrage remaining relatively attractive to roasters in comparison to arabica coffee prices, continues to inspire support for the robusta coffee sector of the industry,” said I&M Smith.
September robusta futures in London were up 1.1% in afternoon deals, at $1,835 a tonne, just shy of Tuesday’s 15-month high.
(Source – http://www.agrimoney.com/news/robusta-futures-rally-as-brazilian-vietnamese-supplies-tighten–9748.html)