World coffee offtake steady this week

World coffee offtake steady this week

LONDON (Reuter): Physical coffee offtake was steady this week with industry focused on new crop Brazilian conillons and Indonesian beans as well as easing differentials.

"Offers from African robustas were steady and there was quite a bit of Ivorian selling, but the brunt of selling came from Indonesia and new crop Brazilian conillons," one trader said yesterday.

Traders said differentials were softer following weaker futures, with benchmark July futures down to US$1,945 yesterday from $2,000 a ton last week.

But industry sources said expectations the EU will scrap its duty on all coffee imports -- except from Brazil -- shortly, also weighed down differentials.

"It seems that from July onwards all coffees into the European Union will be duty free...except those from Brazil," said one source.

Traders said the market expects the EU will soon scrap its duty of four percent per ton CIF on coffee imports, barring those from Brazil, which will retain a duty of 1.7 percent.

If implemented, the agreement will run from June to June 1999, said the source.

Aside from EU duty prospects and easing futures, traders said the volume of offers from Indonesia was also weighing on differentials.

Indonesian traders said between 800-900 tons of coffee were entering the market daily in the key growing region of southern Sumatra, but the volume was still behind main crop arrivals, averaging 1,500-2,000 tons daily.

Indonesian beans were quoted on a nominal basis at $90-100 under July.

Trade in Brazilian conillons was also said to be active with differentials slightly weaker in anticipation of the Brazilian main crop. Traders said they were awaiting softer differentials with the more normal level of exports during May and June.

Brazilian conillons were said to be offered at $100-$120 under for July/August shipment on an FOB basis.

Nearby Brazilian arabicas, Swedish qualities, were said to be offered at 12 cents over New York's CSCE coffee contract in Europe while in Brazil Swedish qualities were five cents over against last week's 8.5 cent premium.

"But for August shipment you could be looking at a differential of seven cents," said one trader.

Vietnam grade two coffee for May/June shipment was cited at $100-120 under FOB while Costa Rica (SHB) was quoted at a one to two cent premium FOB against New York.

Industry sources said while roasters were covered on a short- term basis, they were unfixed on the forwards.

"Industry is nervous of covering too far in advance. The market is still very volatile and could slide when the main Brazilian crop hits the market," said one.