(Updates with cocoa price forecast in 11th paragraph.)
Sept. 12 (Bloomberg) -- The coffee surplus will shrink in the 12 months starting next month as arabica heads for a shortage, Marex Spectron Group Ltd. said.
The surplus will be 250,000 bags in 2013-14 compared with an oversupply of 6.9 million bags in 2012-13, London-based Marex Spectron said in a report today. Arabica will move from a surplus of 7.25 million bags in 2012-13 to a shortage of 250,000 bags in 2013-14 and consumers will use more of the beans at the expense of robustas, it said.
“This demand shift in 2013-14 should put arabica into tiny deficit and robusta into decent surplus,” Marex Spectron said in the report. “The robusta surplus should grow from the middle of calendar year 2014 as Brazil and Indonesia come on line with new crops, both of whom harvest in April/May.”
Prices for both types of coffee declined this year as traders anticipated more supplies. Robusta “could move into a 2 to 3 million bag surplus from the middle of 2014 onward given normal weather,” James Hearn, joint head of agriculture at Marex Spectron, said by phone today. Vietnam is the biggest grower of robusta, followed by Brazil and Indonesia, according to the U.S. Department of Agriculture. Brazil is biggest in arabicas.
Arabica coffee futures dropped 17 percent this year to $1.20 a pound on ICE Futures U.S. in New York. Robusta futures declined 8.7 percent to $1,756 a metric ton (79.56 cents a pound) on NYSE Liffe in London.
Arabica’s premium over robusta fell to about 40 cents a pound now from 87 cents in September. Consumers may switch 2 million bags of demand from robusta to arabica, Marex Spectron said.
Cocoa production will lag behind demand for a second season in 2013-14 after two years of surplus, Marex Spectron said in the report.
Output will be 134,000 tons short of consumption in the 2013-14 season that starts next month after a shortage of 161,000 tons in 2012-13, it said.
“Demand has slightly exceeded expectations driven by emerging markets and a better than expected recovery in parts of Northern Europe and North America,” Marex Spectron said.
“We expect that cocoa consumption will match the rate of global GDP growth which is currently forecast to accelerate gradually during the coming years. However, the most recent turmoil in some key emerging markets may well temper demand in the short term.”
Production will climb 3.8 percent to 4 million tons in 2013-14, below the total in 2011-12 and 2010-11, while grindings, an indication of demand, expand 3 percent to 4.16 million tons, the highest in at least five years, according to the report.
“We believe that the cocoa market has tipped decisively into structural deficit at current prices,” Marex Spectron said. “Although the futures market has already adjusted to the changing fundamentals over the last few weeks, we forecast that futures prices will have to rise to levels approaching 2,000 pounds/$3,000 in both the medium and long term in order to rebalance this situation.”
Cocoa futures in New York jumped 16 percent this year to $2,593 a ton and climbed 17 percent in London to 1,676 pounds ($2,651) a ton.
“Should demand continue to grow at the pace of global GDP growth as currently forecast by the IMF and World Bank, we believe only a rare combination of extremely favourable weather and significantly higher prices will be sufficient to prevent a series of consecutive deficits,” the company said.
--Editors: Claudia Carpenter, Dan Weeks