Colombian beans in very tight supply in Europe's coffee market

Colombian beans were again in very tight supply in Europe's cash coffee market this week with continuing price strength also noted in Central American coffees, physical traders said on Friday. Industry made hand-to-mouth purchases of available Colombian supplies but they were insufficient to meet European demand, traders said.
Colombian Excelso grades were offered at 26 cents above New York's May contract, unchanged on the week but up from 20 cents just before Christmas and only 9 cents above New York in October. Colombian stocks in Europe were offered speculatively for sale at considerably higher differentials, traders said.
Colombia has been suffering from problems including unfavourable weather and logistics difficulties which have seriously reduced volumes offered on international markets in early 2009. "There was a marginal increase in sales offers from Colombia this week for nearby shipment but it was not enough," one trader said. "People are starting to question whether the Colombian shortage is a short term problem or whether this issue is set to continue for months."
High Colombian prices continued to keep Central American differentials firm. "Industry and trade is continuing short covering of Central origins despite firm differentials," a second dealer said. "I saw strong industry and trade demand for Costa Rican beans which could not be satisfied." "Short covering purchases of Guatemalan beans were also apparent." Brazilian business was said to be relatively low-key with industrial buyers taking a breather following some brisk purchasing in past weeks.
New York coffee futures provided little stimulus to physical business, drifting down early in the week but rising again within the recent trading range on Thursday and Friday. The end of the Lunar New Year holiday in Asia meant the return of key robusta exporter Vietnam to the international market. But Vietnamese exporters were generally unwilling to make aggressive sales offers, traders said.
This restrained business levels although consistent industry purchase interest was noted for both nearby and deferred positions. Vietnam Grade Two was offered little changed on the week at $130 to $135 under nearby London contracts. Indonesian differentials weakened, with EK-1 offered at around $100 under London contracts against $80 under last week.
Indonesian roasters had apparently reduced domestic purchasing, opening more supplies for export, traders said. Traders in the key German market noted a new round of price cutting by several discount supermarket chains. German discount supermarkets traditionally use coffee as a loss-leading article to lure people into their shops and one discounter cut some coffee prices by 32 percent this week.