Price differentials rose in Europe's cash coffee market this week as origin sellers saw a slump in coffee futures to a one-year low as divorced from supply and demand fundamentals, traders said on Friday. "Origin sellers were often not willing to accept lower outright prices as they regarded the futures fall as technical and not justified by forecasts of lower crops, especially in Brazil," one cash trader said.
New York ICE arabica futures touched new one-year-lows on Wednesday and Thursday in general commodity weakness as the euro zone's debt crisis caused the dollar to strengthen. In the European cash market, Brazil MTGBF beans traded at differentials of up to 8 cents over New York March against 5 cents over in the previous week. Costa Rica SHB was up 2 cents at 28 cents over New York March and Colombia Excelso was up 3 cents at 25 cents over March.
"Brazilian exporters were offering reasonable volumes of new crop for all 2012 shipment periods this week but I think the quantities traded were limited as differentials were so firm," another cash trader said. "The jury is still out on the size of the Brazilian crop. "Although some trading houses have cut their crop forecasts recently, roasters still believe Brazil will have a good harvest which will further pressure prices along with the impact of the euro debt crisis."
Business in Central American beans was also said to be restrained, with buyers turning towards cheaper washed African arabicas quoted at negative differentials to futures, dealers said. Trade in Vietnamese robusta remained difficult because of a lack of sales offers despite the harvest in the world's largest robusta producer reaching its peak. "The lack of farmer selling in Vietnam appears to be caused by dissatisfaction at the level of robusta futures and the weakness in differentials despite the absence of Indonesia from the export market after its poor crop," a trader said. "With the absence of origin sales offers there was brisk trade in the European spot market with deliveries from local stocks."
Origin differentials demand from Vietnam of $50 over London futures were generally rejected by roasters expecting the Vietnams harvest to put downward pressure on differentials, traders said. "The first rumours were going round the market this week that Vietnamese sellers were talking about defaulting on contracts rather than deliver at current depressed prices," a trader said. "But the country's storage space is limited and with between 50 to 65 percent of the harvest finished, roasters think Vietnam cannot go on for much longer without disposing of some large volumes of new crop on international markets." There have been increasing complaints about defaults by Vietnamese sellers when the market moves against them. Colombian trade was also difficult, with more bad news about the country's harvest this week.