Robusta coffee futures prices are poised to retreat from four-month highs when top producer Vietnam starts selling its beans.
Farmers in Vietnam have been holding back their stocks as they wait for higher prices. Now that futures traded in London are above $2,000 a metric ton, traders and analysts expect the farmers to release their beans into the market soon.
Vietnam is the world’s top robusta producer and the second-largest coffee exporter behind Brazil. Vietnam’s harvest for the year ending Sept. 30 was better than the market had expected, prompting oversupply worries that helped send prices to $1,720 a ton, a 13-month low, in January.
At those prices, farmers chose not to sell. In addition, Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association, said loans from agricultural banks have been more forthcoming this year, enabling farmers to hold on to their stocks for longer.
As a result, only 40% to 45% of the coffee has been sold, even though the harvest is complete, a Singapore-based trader said.
The current lack of available beans has helped achieve the farmers’ goal. Robusta coffee futures for March delivery rose 1.6%, or $33, to settle at $2,143 a ton Wednesday on the NYSE Liffe exchange, its highest close since Sept. 20. That is a nearly 25% gain from the low seen just weeks ago.
Supporting those gains were trading houses increasing their bets that prices would rise this month.
“The recent rally was purely caused by players on the trading house side—no funds are involved in this,” a London-based dealer said.
Hong-Kong based trader Noble Group and Singapore-based Olam International were unavailable for immediate comment, while U.K.-based Armajaro Trading declined to comment.
“Farmers still hold large stocks of beans in Vietnam and Indonesia, so forward selling will increase,” which will drive futures prices lower, said Keith Flury, senior soft commodities analyst at Rabobank in London.
Robusta is an easier-to-grow coffee variety and is less expensive because its taste is considered to be more bitter than that of arabica.