Coffee futures trading outlook: robusta falls amid favorable weather conditions

Robusta futures fell on Monday after rains boosted crop development in the worlds biggest producer of the coffee variety – Vietnam. Arabica futures also fell but losses were limited as Brazil, the top producer, is expected to export more coffee compared to last year, drying out stockpiles, while it will be unable to gather extra supplies after the worst drought in recent memory damaged the crop.

On the NYSE Liffe, robusta for delivery in September fell by 0.72% to $1 937.00 per ton by 12:07 GMT, having ranged between $1 951.00 and $1 932.00. Prices added 0.3% on Friday, settling the week 0.1% higher. The contract rose by 4.4% in July, a second straight monthly advance, following an 11% decline in May.

Meanwhile on the ICE, arabica futures for settlement in December dropped 1.01% to trade at $1.9120 per pound at 12:02 GMT. Prices held in a daily range between $1.9300 and $1.9045 a pound. The coffee variety added 2.5% on Friday and settled the week 1.3% higher following the previous weeks 4% advance.

Coffee prices were pressured to the downside as producers in Vietnam reported that the crop is fully grown and of similar size compared to the past five years as rains favored the crops development. Bloomberg reported that farmers have applied two rounds of fertilizer and the harvest is expected to begin in October, easing speculations of a supply deficit which, according to Volcafe Ltd., may amount to 96 000 tons, or 1.6 million bags. The International Coffee Organization reported earlier in August that total coffee shortfall may be 10 million bags, mainly due to the drought in Brazil.

Vietnams total output may fall by 3% to 1.65 million tons in the 2014-2015 crop year, easing from last years record, as the previous record crop stressed trees and the recent rains spurred diseases in some regions.

Vu Dinh Noi, head of a production team at state-owned Thang Loi Coffee Co., said, cited by Bloomberg: “Cherries have basically reached their full size after heavy rains. The key now is applying fertilizer and preventing disease. A mix of rainy and sunny days would help.”

Cao Van Tu, chairman of Dak Lak-based Ea Pok Coffee Co. said for Bloomberg: “While heavy showers did cause cherries to fall off on our plantation, our agronomists addressed the issue so the amount affected was not that much.”

Meanwhile, losses in arabica futures were limited as Brazils stockpiles were reported to be running low after the worst drought in recent history hurt the biggest arabica growers crop, while exports are on the rise.

Data last week from Brazilian shippers group Cecafe showed that Brazils green coffee exports for the seven months through July jumped by 21% to 18.52 million 60-kilogram bags from a year earlier. Outbound shipments in July were up 37% at 2.66 million bags. The group sees total exports for 2014 at around 33 million bags – up from last years 31.2 million bags.

Carlos Brando, a consultant to the International Coffee Organization and the World Bank said that the rising exports and good pace of early harvest had created a false impression of a crop that was not as bad as expected. He underlined the possiblity of a shortfall as Brazils domestic consumption amounts to 21 million bags, leaving only 24 million bags available for exports from the average harvest estimate of 45 million bags.

Mr Brando said: “The high volume of Brazilian exports in 2014 and a possible record figure for the full year should not deceive market analysts. These high exports are being supported by inventories that are being drained down and will not be replenished by the current crop.”