Top producer: A farmer picks coffee cherries in Vietnam’s central highland of Di Linh district. Prices of robusta beans used in instant coffee surged this year as droughts hurt production in the South-East Asian country, the leading grower of the variety. — Reuters
HANOI: Coffee futures surged, with robusta in London jumping the most intraday since 2010 as concerns grew over supply from key grower Vietnam.
Robusta coffee rose as much as 7%, while arabica gained 6%. Prices for robusta beans used in instant coffee have surged this year as droughts hurt production in Vietnam, the top grower of the variety, before easing earlier this month.
Rains have helped to improve the supply picture, but more may still be needed.
Also supporting prices is high demand for robusta beans.
Typically, a rise in robusta prices encourages a shift towardS using more arabica in blends, but that isn’t happening at this time, Andrea Illy, chairman of Italian coffee roaster Illycaffe SpA, said on Tuesday on Bloomberg Television.
“It’s a quite unique dynamic in the market,” Illy said, adding that “for certain kinds of preparation, like instant coffee, robusta is more important”.
Illy said that climate change has made coffee supplies less reliable, creating an “unstable dynamic” in bean inventories and higher baseline prices.
Exports of both robusta and arabica from Brazil, the world’s top coffee producer, are strong, Rabobank analyst Guilherme Morya said in a note.
But uncertainties about Vietnam’s robusta supply have attracted hedge funds into the market and driven up international prices, he said.
Meanwhile, harvests in Indonesia are expected to start this month or next, marking a “substantial delay from the norm” due to droughts caused by El Nino, according to a report last Friday from the US Department of Agriculture.
Better weather is expected to support a recovery in output next season for Indonesia, the world’s fourth-biggest coffee producer, which primarily grows the robusta variety.
Coffeee production is seen rising 14% to about 10 million bags in 2024, the Association of Indonesian Coffee Exporters and Industries said on Monday. — Bloomberg
