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Robusta coffee declines on Vietnam supply concerns   2008-05-21 - Bloomberg

 
Vietnam is the world’s biggest exporter of Robusta coffee bean, which is used in instant coffee and espresso  
Robusta coffee fell in London on concerns about rising supplies from Vietnam, the world’s biggest grower of the bitter-tasting bean variety.

 

 

White sugar and cocoa also retreated.

Vietnam is forecast to increase Robusta output by 23 percent to 21.5 million bags next season on improved yields and growing conditions, the US Department of Agriculture said last week.

The beans are up 31 percent in the past year, prompting farmers to destroy forests to plant new coffee trees.

The country’s “next crop is meant to be pretty high,’’ Ralph Hawes, a coffee trader at Sucden (UK) Ltd., said on the phone from London.

“Clearly higher prices are supportive’’ of farmers boosting their output.

Robusta for July delivery fell US$19, or 0.8 percent, to close at $2,261 a ton on London’s Liffe exchange.

Coffee climbed 2.2 percent last week in London, the second consecutive weekly gain, compared with a 0.7 percent increase in the UBS Bloomberg CMCI Index of 26 raw materials.

“The funds are a little bit sidelined,’’ Hawes said.

The industry doesn’t appear to be in any need to bolster inventories, he said.

Planting trees

Farmers in provinces in Vietnam’s Central Highlands are “racing’’ to plant coffee trees, said Duong Ngoc Thi, vice director of a Ministry of Agriculture and Rural Development policy institute.

The trend hasn’t slowed even after the ministry issued a directive to keep Vietnam’s coffee-growing areas at between 480,000 and 500,000 hectares (1.24 million acres) until 2010.

The expansion will probably lead to a drop in coffee prices, according to Luong Van Tu, chairman of Vietnam Coffee and Cocoa Association.

The planting of trees in areas without sufficient access to water will also increase production costs and reduce quality.

Global coffee production will rise about 9percent next season, led by Brazil, and match demand, according to the London-based International Coffee Organization (ICO).

Output in the season ending September 2009 will reach about 127 million bags, compared with 116.9 million bags this year, the ICO said in a May 13 report.

Demand will be “at least” 127 million bags next year, compared with 125 million bags this year.

One bag of coffee weighs 60 kilograms (132 pounds).

Among other agricultural commodities, white, or refined, sugar for August delivery fell $4.20, or 1.3 percent, to $329.20 a ton.

White sugar rose 0.1 percent last week to $333.40 a metric ton.

Four of seven traders, analysts and brokers surveyed last week by Bloomberg forecast that raw sugar traded in New York will gain this week.

Two said it would fall.

Three out of six surveyed said they expected white sugar traded in London to rise.

Cocoa futures for July delivery fell 27 pounds, or 1.8 percent, to 1,440 pounds ($2,804) a ton on Liffe.



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