Coffee to Outperform Cocoa on Supply Deficit, Olam Says

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Coffee may outperform cocoa as production falls short of demand, tightening global supply, said Olam International Ltd. (OLAM), one of the world’s three biggest suppliers of both commodities.

“The difficulties in terms of adequate supply and declining stocks-consumption ratios will support coffee prices in the near term,” said Sunny Verghese, chief executive officer of Olam. He did not elaborate on the size of the expected shortfall.

Arabica coffee has jumped 57 percent in New York in the past year and robusta surged 44 percent as inventories declined and output slumped in Vietnam, the world’s second-biggest shipper. The global coffee market will have a 4.6 million bag deficit in the 2011-2012 season, as production of arabica and robusta beans trails demand, according to a Rabobank International forecast on Aug. 26. A bag is 60 kilograms.

Stockpiles will be 22.7 million bags, equal to 16 percent of use, Rabobank said. That’s the smallest ratio ever, according to U.S. government data.

December-delivery Arabica coffee gained 1.9 percent to $2.8445 a pound in New York yesterday, while Robusta coffee for November delivery was unchanged at $2,362 a metric ton in London.

The global cocoa surplus may be “close” to 400,000 metric tons in the 2010-2011 season, potentially pushing prices lower, Verghese said from Singapore today. That’s bigger than the 325,000-ton record surplus estimated by the International Cocoa Organization on Aug. 26.

“Cocoa at this point is oversupplied,” Verghese said. “We are bearish. There should be pressure on prices in the near-term,” he said, without elaborating.

December-delivery cocoa climbed 2 percent to $3,135 a ton in New York yesterday. Futures are up 16 percent in the past year.

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