Coffee prices seen resisting pressure from global surplus

Coffee prices will hold their current trading range through 2013 even as record harvests in Brazil and Vietnam, the world's two biggest growers, push the market into a surplus of an estimated 4.5 million bags, according to a Reuters poll of 29 analysts and traders.
Spot arabica prices are seen ending 2012 at $1.90 per lb, down 16 percent from the end of 2011, and sitting at an average of $1.85 in 2013. On Tuesday, the contract tumbled 5.2 percent to end at $1.7545 per lb. The latest poll, showing the market expects prices to remain relatively stable at lower levels amid plentiful supplies, is in stark contrast to the surge that lifted arabica prices to 34-year highs above $3 per lb and roiled roasters in May last year.
Forecasts of plentiful supplies have already pressured prices this year. Barring a deterioration in global economies, analysts expect that better demand from emerging markets and stable demand from developed markets will absorb much of the additional supply this year and next.
Shawn Hackett of Hackett Financial Advisors in Florida, who had the most accurate price forecast for ICE arabica futures in Reuters' last poll in January, said he expects arabica prices to end 2012 at $1.85 per lb. But he was bullish for next year predicting prices will average $2.50 as he expects the relatively low prices will lure roasters back to higher quality beans. The poll's median pegged Liffe benchmark robusta prices at $2,025 per tonne by the end of 2012, up 12 percent from the end of 2011 but well within their recent range, and at an average of $2,015 in 2013.
Forecasts of a surplus for the 2012/13 marketing year are a marked shift from the forecasts of a small deficit in the prior year. In Reuters' last poll in January, analysts and traders predicted a 1.75-million bag global deficit in 2011/12. In this poll, they kept their forecast for 2012/13 output in top grower Brazil unchanged at 55 million 60-kg bags even after the heavy rainfall of the last month delayed the harvest and damaged bean quality.
The median output from No 2 coffee grower Vietnam, which is the world's biggest producer of robusta beans, was pegged at 22.25 million bags in 2012/13. That would be up 11 percent from the 20 million bags produced in 2011/12, International Coffee Organisation data showed. Analysts polled predicted a median surplus of 1 million bags for robusta in 2012/13, although estimates ranged from a 2-million bag deficit to a 4-million bag surplus. Arabica is seen reaching a 3-million bag surplus.