Vietnamese differentials firmed in Europe's cash coffee market this week despite the harvest gathering pace in the world's largest robusta producer as sellers were dissatisfied with falling futures prices, traders said on Friday. "Vietnam's harvest weather is all but perfect, a factor which pushed London robusta futures down this week," one cash trader said.
"But physical delivery business levels dropped sharply as producer selling in Vietnam dried up and differentials were hiked to compensate for the futures fall." Differentials for Vietnam Grade 2 robusta firmed to level or as much as $10 over nearby London robusta futures on Friday from $30 under London last week.
London Liffe January robusta coffee futures fell to the lowest level for the second month since February 6 on Wednesday but recovered slightly on Friday. Dealers said the London market had been driven down by ample supplies with the harvest in Vietnam currently in full flow. "A difficulty is that there is not much high-volume alternative to Vietnamese robusta when Vietnamese differentials firm," another trader said. "Indonesian differentials remain sky-high and are not an option."
Differentials for Grade 4 robusta from Indonesia, the second largest producer after Vietnam, was quoted unchanged on the week but hugely over Vietnam at $120 over nearby London. Indonesian differentials rose sharply in early November because of tight supplies following disappointing harvests. In arabicas, Brazilian trade was restrained as New York arabica futures slumped again this week partly on expectations of a large Brazilian crop.
Brazilian Swedish grade beans were unchanged on the week at 17 cents under nearby New York futures. "The falls in futures were not enough to make anyone happy this week," a trader said. "The Brazilians were not happy with the falling outright prices while European roasters are hoping for even more falls. Buyers and sellers were far apart in differential ideas."
"Roasters remain under intense retail price pressure in many European countries as the euro zone debt crisis continues to weaken consumer spending. The New York price falls have not created a window for large-scale roaster purchasing yet as roasters are praying for a big further drop." In the Central American sector, good demand was seen for Costa Rican beans as good weather continued and parts of the country approach their harvest peak. Higher quality Guatemalan beans were also in demand. Some interest was noted in Colombian beans at unchanged differentials of some 12 cents over nearby New York futures.
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