London's robusta coffee market stampeded higher on Friday as an unprecedented level of fund investment pushed prices to the highest for more than five years, traders said. Robusta, the variety commonly used in instant coffee, has doubled in price since early November, gaining about 10 percent this week alone. Arabica, the more expensive variety traded in New York, peaked just shy of $1.40 a lb on Friday, a fresh five-year high.
Robusta coffee futures for May delivery peaked at $1,125 a tonne on Friday - a price not seen since February 4, 2000. The contract closed up 0.6 percent at $1,070 after some speculators took profits but traders said the rally could push on with new targets ranging from $1,200 to $1,500.
"Roasters are tearing their hair out," a London-based analyst said. "They're waiting for a pull-back but anything could happen...It's a market that has lost its rationale."
Coffee manufacturers such as Nestle SA and Kraft Foods Inc have enjoyed cheap prices in recent years after over-production caused a slump to a 30-year low in 2001.
The leading coffee brand of Procter & Gamble Co, Folgers, said on Friday it increased its list ground coffee price for US retail customers by 12 percent.
Nestle Chief Executive Peter Braback said last month that a price of $1 to $1.20 per lb of arabica was a fair price for both farmers and consumers. Nobody was immediately available for comment on this week's market rise at Nestle's UK office.
The British Coffee Association's Executive Director Dr Euan Paul said he expected roasters to raise retail prices in the UK over the next three months if futures stuck at current levels or rose further.
Total volume in London coffee on Friday hit 17,076 lots, with May accounting for turnover of 10,757 lots.
Vietnam, the world's biggest robusta grower, has sold the majority of this year's crop so the rally was meeting little resistance, traders said. Farmers are now holding back the beans they have left in the hope of higher prices still.