Robusta coffee, the type used in instant beverages, increased to its highest level in more than four years as buyers sought to replenish stockpiles by purchasing beans from exchange warehouses.
Futures in London have increased nearly 60% this year as adverse weather has harmed crops and logistics issues, including a shortage of shipping containers, have hampered exports from Vietnam. Last week, Nestle SA, the owner of the Nescafe brand, informed investors and analysts that coffee would become more expensive next year due to rising input costs.
On Monday, Robusta rallied as much as 3.7 percent in London. The gain comes ahead of the November contract’s deadline for traders to declare their intentions to take delivery or deliver against it.
“Because first notice day is tomorrow, you can anticipate considerable volatility, particularly in the first month contract. That appears to be the case today,” Rabobank analyst Carlos Mera said over the phone. “There is considerable interest in certified stocks, which serve as a substitute for coffee that cannot be shipped on time from origin.”
Robusta for January delivery settled 2.5 percent higher in London, at $2,195 per metric tonne, having earlier reached its highest price for the most active contract since February 2017. Meanwhile, arabica – the variety prefered by coffee chains – increased by as much as 2%.
“As the coffee market rises, margin pressure on shorts will increase, potentially resulting in more forced short closeouts,” Charles Branch, head of softs and agricultural commodities at brokerage Britania Global Markets Ltd., wrote in an email.
Traders’ short-covering typically contributes to price increases.