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Robusta coffee falls as producer hedging weighs

Robusta coffee futures on ICE fell further on Wednesday, after a wave of producer hedging halted the market’s recent advance.

* July robusta coffee was down $28, or 1.6 percent, at $1,766 a tonne by 1101 GMT, after hitting a session low of $1,758.

* The market last week tapped $1,845, its highest since November 2017, partly supported by dwindling certified stocks.

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* However, dealers said the market’s advance above the $1,800 mark had attracted heavy producer hedging on Tuesday, which knocked prices lower and encouraged follow-through selling.

* “It ran into a wall of selling,” one European dealer said. “You had Vietnamese hedging as well as very good Brazilian hedging, which is something new for robusta. And that stopped the rally in its tracks.”

* Dealers also pointed to the Brazilian real as a factor, after it fell sharply to its lowest since June 2016 on Tuesday.

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* A weaker real encourages producers to sell dollar-denominated commodities like coffee by improving local currency returns, although it typically impacts Brazil’s larger arabica coffee market.

* “Often the Brazilian real doesn’t really matter for robusta,” the dealer said. “But because there’s a good conillon crop this year and there’s availability, the real does matter this time around.”

* Vietnam exported 32.59 million 60-kg bags of coffee in April, slightly below government estimates but 22.2 percent lower than exports in March.

* July arabica coffee slipped 0.25 cents, or 0.2 percent, to $1.1935 per lb.

Copyright Reuters, 2018

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