Robusta coffee futures rallied to the highest in more than a decade driven by dwindling stockpiles for the beans favored for instant-coffee brands such as Nestle SA’s Nescafe.
January futures in London jumped as much as 3.8% to $2,278 a ton, the highest for a most-active contract since September 2011. Arabica coffee also rose in New York.
Both varieties have climbed more than 60% this year after drought and frosts damaged the arabica crop in Brazil, the No. 1 coffee producer, boosting demand for the cheaper robustas. The January-March spread in London surged to record premium.
At the same time, soaring shipping costs are hindering a draw down of hefty stockpiles in robusta giant Vietnam. Exchange-monitored stockpiles for both varieties have continued to slide as roasters tap stored reserves.
Technical-trading indicators are “very positive” and that attracted more buying, plus “there’s concern that flows have been paralyzed out of Vietnam because of the lack of container and elevated freights,” said Hernando de la Roche, senior vice president at StoneX Financial in Miami.
Eoin Treacy's view
The Baltic Dry Index is currently unwinding a short-term overbought condition so that will take some of the pressure off of exporters of just about everything. Nevertheless, it will be quite some time before the port bottlenecks are eliminated.
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