Robusta coffee prices prediction 2016 : Drought in southeastern Brazil and El Nino in Indonesia will damage 2015/16 robusta coffee output and could drive world prices higher if the dry weather persists, although a big Vietnamese crop will cap the upside, traders say.
Benchmark ICE robusta futures hit a 2-1/2-month high of $1,684 a tonne on Nov. 5 on concerns over depleted supplies due to drought in No. 2 robusta producer Brazil’s Espirito Santo state, and El Nino-related dryness in No. 3 producer Indonesia.
Irrigation bans in Espirito Santo underline the seriousness of the drought in Brazil’s leading robusta-growing state and are due to remain in force until late November, depending on rains in coming days.
“At the moment it does not look likely that the authorities will lift the irrigation bans,” said Carlos Mera, analyst with Rabobank.
The drought over Espirito Santo helped reduce robusta output in Brazil to 10.85 million 60-kg bags in 2015/16, from 13.04 million last year, the Agriculture Ministry says.
This will leave the domestic market tight in the first half of 2016.
In Indonesia, robusta output could fall sharply.
Saimi Saleh, deputy chairman of the Association of Indonesian Coffee Exporters and Industries (AEKI), said production could drop to 5.8-6 million 60-kg bags in 2016 from 6.7 million in 2015, depending on the severity of El Nino.
Saleh said that if the El Nino weather phenomenon dragged on in Indonesia, he saw risks of big price rises for robusta.
“If El Nino goes on like this, world prices could be doubled," he said.
A London-based broker said a big harvest in top producer Vietnam, now under way, was expected to mitigate the impact of the dry weather in Brazil and Indonesia.
"Indonesia has some loss of production potential but it is not yet clear how much," the broker said.
"It would need to be a huge loss (i.e. 3 million bags) to balance the additional supply from Vietnam."
The broker added: "Despite El Nino-related losses in Brazil and Indonesia, we cannot get too bullish on robusta prices. This would change if the drought continues for a few more weeks."
Hamish Smith, a commodities economist with Capital Economics, said: "The cumulative effect of the dry weather has the potential to push robusta prices higher into next year."
Benchmark ICE robusta futures hit a 2-1/2-month high of $1,684 a tonne on Nov. 5 on concerns over depleted supplies due to drought in No. 2 robusta producer Brazil’s Espirito Santo state, and El Nino-related dryness in No. 3 producer Indonesia.
Irrigation bans in Espirito Santo underline the seriousness of the drought in Brazil’s leading robusta-growing state and are due to remain in force until late November, depending on rains in coming days.
“At the moment it does not look likely that the authorities will lift the irrigation bans,” said Carlos Mera, analyst with Rabobank.
The drought over Espirito Santo helped reduce robusta output in Brazil to 10.85 million 60-kg bags in 2015/16, from 13.04 million last year, the Agriculture Ministry says.
This will leave the domestic market tight in the first half of 2016.
In Indonesia, robusta output could fall sharply.
Saimi Saleh, deputy chairman of the Association of Indonesian Coffee Exporters and Industries (AEKI), said production could drop to 5.8-6 million 60-kg bags in 2016 from 6.7 million in 2015, depending on the severity of El Nino.
Saleh said that if the El Nino weather phenomenon dragged on in Indonesia, he saw risks of big price rises for robusta.
“If El Nino goes on like this, world prices could be doubled," he said.
A London-based broker said a big harvest in top producer Vietnam, now under way, was expected to mitigate the impact of the dry weather in Brazil and Indonesia.
"Indonesia has some loss of production potential but it is not yet clear how much," the broker said.
"It would need to be a huge loss (i.e. 3 million bags) to balance the additional supply from Vietnam."
The broker added: "Despite El Nino-related losses in Brazil and Indonesia, we cannot get too bullish on robusta prices. This would change if the drought continues for a few more weeks."
Hamish Smith, a commodities economist with Capital Economics, said: "The cumulative effect of the dry weather has the potential to push robusta prices higher into next year."
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