LONDON (Reuters) – The relentless coffee price rally continued on Thursday as arabica hit a new record approaching $4 per lb on extremely tight supplies and fears over the outlook for the coming crop.
Arabica coffee futures on the ICE exchange, used as a benchmark to price physical beans around the world, hit a record $3.7420 per lb earlier in the day, up more than 15% already this year. They were up 1.4% at $3.7150 by 1524 GMT.
Dealers said exchange data shows that top roasters such as Nestle and JDE Peet’s are under-bought and still have much buying to do while speculators remain bullish on coffee.
Supplies remain extremely tight in Brazil after severe drought last year dented forecasts for the coming crop. Brazil produces nearly half the world’s arabica.
There has been some hope that the situation might not be as bad as previously feared, thanks to rains over the past few months, but dealers said the latest weather forecasts have made people nervous again.
“Below-average rainfall in some (Brazilian) regions has once again fuelled fears,” trader Icona Cafe said in a report, citing forecasts for longer periods of dry weather and rising temperatures in key coffee regions over the next few weeks.
Supplies are also tight in robusta coffee, which is to some extent fungible with arabica even though it is used generally to make instant coffee rather than roast and ground blends.
Robusta coffee rose 0.9% to $5,632 a metric ton, having touched $5,695 earlier for its highest since 1977 at least, according to the International Coffee Organization’s (ICO) price index.
Farmers in Vietnam, the world’s top robusta producer, are holding back sales in anticipation of further price gains while a sharp slowdown in trade and shipping is expected at the end of January because of Lunar New Year celebrations.
Vietnam also experienced drought last year, followed by heavy rains.
Broker Sucden, which expects the global coffee market to record a fourth consecutive deficit this season, said that Brazil’s current buffer stocks have eroded to about 500,000 bags, versus the more usual 8 million.
Stocks on the ICE exchange, meanwhile, have fallen 5% to less than a million bags over the past week, keeping traders on edge and talking of robust spot demand, especially for Brazilian coffee in Europe.
In other soft commodities, New York cocoa futures fell 3.5% to $11,141 a ton while London cocoa lost 3.3% to 8,594 pounds a ton.
Raw sugar was up 0.4% at 19.52 cents per lb, having hit a five-month low last week, while white sugar gained 0.3% at $524.20 a ton.
(Reporting by Maytaal Angel; Editing by David Evans and David Goodman)
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