Robusta coffee rises most since 2010 on Vietnam rain concerns

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 toward using more arabica in blends, but that isn’t happening at this time, Andrea Illy, chairman of Italian coffee roaster Illycaffe SpA, said 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 the following, marking a “substantial delay from the norm” due to droughts caused by El Nino, according to a Friday report 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. Production is seen rising 14% to about 10 million bags in 2024, the Association of Indonesian Coffee Exporters and Industries said Monday.

In other softs, cocoa rose as much as 3.8%, reversing losses from earlier in the session. The New York contract yesterday fell to the lowest intraday price since March.

Futures, which are trading around $7,000 a ton, are still up more than 70% this year, though they have eased significantly from a mid-April record above $11,000 a ton. A mix of rain and sun is helping cocoa plants sprout fresh leaves, flowers and cherelles in parts of Africa, where most crops are grown. Still, trees are also attracting insects and farmers are running short of pesticides.

“A shift toward wetter weather over the past few months has improved the prospects for West Africa’s upcoming production, which has pressured cocoa prices,” the Hightower Report said. But there are fears that a lack of fertilizer and pesticide use will hurt output during the 2024-25 season.