Robusta firm, arabica to stay weak

Robusta coffee prices in the domestic market may continue to stay firm this week, drawing support from the international markets as well as consistent exporter buying interest, traders said.

However, local prices of arabica coffee grades is seen weak, as demand remains weak, they said.

Export demand for robusta varieties has been firm on overall global supply tightness, while offtake of arabica varieties has been slack.

With the monsoon setting in and the start of harvest in Brazil, the world's leading producer of arabica coffee, the existing stocks in India may not find many takers, traders said.

On the London International Financial Futures Exchange (LIFFE), September robusta is seen in a narrow range as the markets are in a consolidation phase after the recent gains, said analysts.

September arabica on the New York board of trade (NYBOT) is likely to mirror trends on LIFFE and trade in a tight band with a possibility of moving either way, said analysts.

All robusta varieties are likely to stay firm primarily helped by export demand, said A N Devraj of Sarathy Curing Works.

"There are no robusta stocks available globally, with Vietnam stocks all sold out," he said.

According to him, Indian robusta coffee is receiving enquiries from exporters due to the global shortage.

Vietnam, leading producer of robusta, has exhausted its stocks this year.

During January-June, Indian arabica coffee exports fell, while those of robusta coffee rose year-on-year (y-o-y).

The country's coffee exports during January-June were slightly down at 129,407 tonnes, compared with 130,513 tonnes a year ago, according to the data from coffee board of India.

Arabica coffee exports fell 37 per cent at 27,932 tonnes, while robusta coffee exports rose 9 per cent at 68,081 tonnes.

Robusta is used for making instant coffee, exports of which have also risen.

Arabica coffee prices may remain sideways as the global markets are also seen moving in a range, said Devraj.

"Domestic arabica coffee prices have come down by Rs 1,000 a 50 kg to Rs 4,000 in the last six months," said Devraj.

The rupee's recent rise against the dollar is also not helping arabica exports, he said.

The Indian unit, which has risen about 9 per cent since January, today opened at 40.39 per $1.

India exports 80 per cent of the coffee produced.

Both LIFFE and NYBOT are likely to move sideways this week as prices are in a consolidation phase, according to Karvy Comtrade analyst Chowda Reddy.

He expects LIFFE robust coffee futures for September delivery to find support at $1,875 a tonnes, with the next support level at $ 1,850.

Its first resistance might be at $1,925 a tonnes followed by $1,945 a tonnes.

"Traders will watch out for any break-out in support or resistance or look out for news that could provide direction," said Reddy.

On Monday, Robusta coffee for September delivery closed at $1,894 (Rs 76,518) a tonnes, down $3 in thin trade.

NYBOT September arabica may find support at $1.09 a pound and resistance at $1.11 a pound, said Reddy.

September arabica coffee closed on Monday 35 points down at $1.0940 (Rs 44) a pound.