Strong consumption may push up robusta coffee prices

Demand for robusta coffee beans in major consuming countries has been growing

Robusta coffee prices are likely to increase in the coming quarter on the back of higher demand from major consuming countries. Robusta prices are currently hovering around $2,100 a tonne. Prices have more or less been holding steady for the past year.

"The new trend in robusta consumption started last year following high prices for Arabica (a species of coffee). The roasters and retail coffee chains started serving robusta, as it is considered to be good material for getting creamy coffee in the retail stores. Also, the instant coffee market started using more robusta variety. All these led to rise in the prices of robusta," said Nishant R Gurjer, chairman, Karnataka Planters' Association.

In addition, the robusta crop in Vietnam, the largest producer of the variety, is expected to be lower by 8-12 per cent for the coming year, as the country is facing drought this year.

"Robusta export pace from Vietnam is expected to fall after January, as 9.9 million bags, 41 per cent of our export forecast, have been shipped in the first four months of the season. We anticipate London robusta prices need to trade near $2,100 per tonne to ensure selling meets demand on the assumption that origin price differentials only shift modestly," Rabobank said in its latest forecast.

The Rabobank analysts also forecast that global robusta consumption will rise three per cent in 2012-13, while global production will increase only one per cent. Currently, 60 million bags of robusta are consumed globally, compared to 90 million bags of arabica (each bag is 60 kg).

"There is a lot of demand of robusta in the markets of Russia, East Europe and in new markets such as South Korea, where people are shifting from tea. Robusta is being preferred as consumers are looking for robusta as a cheap substitute," Gurjer added.

The production in Vietnam is likely to be lower by 12-15 per cent for the coming season, compared to last year's crop size of 25 million bags.

Indonesian robusta crop production is up 47 per cent year-on-year, which will be used to fulfil rising global consumption.

"Robusta prices will likely shift higher in the coming quarters based on the export data from Indonesia and Vietnam, and we anticipate reduced numbers encouraging investor buying," said Rabobank.

India's robusta crop for the current year is likely to be on expected lines of the Coffee Board and growers �" at 210,000 tonnes. The reasons for subdued production estimates are attributed to the normal berry drop during the monsoon period and black rot and stalk rot (plant diseases) in certain high rainfall areas.