Indonesian robusta prices shoot up in Europe's cash coffee market

Indonesian robusta price differentials shot up in Europe's cash coffee market this week as the country's export supplies dried up, dealers said on Friday. "Indonesian trade became incredibly difficult this week with hardly any supplies being offered on the international market from origin," one trader said. "With Vietnam no alternative because of low selling, differentials just shot through the roof."
Indonesia EK-1 robusta beans were on Friday offered at $290 a tonne over London's September contract, up $110 on the week. Traders said this was the largest weekly rise in at least the last five years. A poor crop in Indonesia, the world's No 2 robusta producer, means the country may cut exports by 30 percent in 2011. Asian traders also reported surging Indonesian differentials.
"There was talk of much buying of robusta stocks in Antwerp this week," another trader said. "People were anxious to get supplies from almost any robusta origin available in stocks. European stocks are cheaper than from origin but the volumes are much smaller, there is unmet demand for robusta." Differentials from Vietnam, the world No 1 robusta producer, also firmed but by a more marginal $10 on the week to $220 over London September.
Vietnamese farmers in been retaining stocks because of dissatisfaction at robusta futures which are well below levels seen between March and June. "There is increasing talk about defaults by Vietnamese exporters simply refusing to deliver on previous deals and instead seeking to resell at higher differentials," a dealer said.
Indonesian and Vietnamese robusta had been offered at differentials of around $100 under London futures in March, a level both have traded around in recent years. There had been talk about Vietnamese defaults in June as coffee futures fell. "Some Vietnamese traders want to rip up contracts and sell the coffee again at low prices," a trader said. "In these days of open trade it is easy to forget this is a communist country and you cannot seriously get legal redress there." "Exporters which in the past have defaulted have evidently not been stopped from trading by Vietnamese authorities."