* 3-4 million bags of demand seen switching to arabica
* Brazil main market where switching happening
By Sarah McFarlane
LONDON, Oct 30 Coffee drinkers in Brazil,
America, Eastern Europe and the Middle East are expected to down
more arabica beans in their brew in the coming year as cheap
prices attract additional demand for the higher spec product.
A surplus from top grower Brazil after two successive bumper
crops helped drag arabica prices to a
four-and-a-half-year low this week, which is likely to prompt
roasters to increase the use of the bean in their blends.
But drinkers detecting more of arabica's distinctively
sweeter, gentler notes in their cup will probably be saying more
about the power of suggestion than their discernment, as
roasters will only be tinkering with blend changes that
consumers are unlikely to notice.
A Reuters poll of 10 international coffee traders and
roasters showed that between 3 and 4 million 60-kilogramme (132
lb) bags of coffee demand - out of a market total of more than
140 million - is forecast to switch out of robusta beans into
arabica in 2013/14.
Arabica beans are usually found in high quality brands and
typically trade at a premium to the hardier, more caffeine-rich
robusta beans, which are widely used in instant coffee.
Lately the price difference between some of the lower grade
arabicas and robustas has been eroded, putting in reverse the
trend from 2011/12, when roasters increased the proportion of
robusta in their blends to the tune of around 5 million bags
globally due to a historically high premium on arabicas.
"Clearly it's happening, although I don't think it's going
to be as big as the switch we saw out of arabica in 2011/12," a
European analyst said.
"The biggest swing is in Brazil."
The world's top coffee grower is also one of the largest
consumers, using over 20 million bags a year. Up to 1.5 million
bags of Brazil's domestic robusta consumption was forecast to
switch into arabica in 2013/14.
"Domestic roasters are fairly flexible so they can move out
of robusta into low-grade arabicas on a large scale," said a
trader, adding that Brazil was a very price-sensitive market.
Coffee roasters, typically secretive about their blends,
stepped up substitution of arabicas with robustas after ICE
benchmark arabica futures rose to a 34-year high in May
2011 and the premium over robusta hit about $1.90/lb.
The premium has since narrowed to below 40 cents, and
dealers said it could shrink further.
There is a wide spectrum of qualities within the arabica and
robusta varieties, so the premium varies between different
grades, with traders noting that Brazil's rio minas arabica had
traded at a discount to some robustas in the past month.
"There will be switching, but the quantity will depend on
the quality of low-grade arabicas," a trader at an international
Roasters have become more nimble in recent years to enable
themselves to react to prices and availability.
"In general customers (roasters) have become a little bit
more flexible in comparison to 10 years ago. In the past the
blend or ingredients were written in stone, they were
untouchable, and that has changed," a coffee trader said.
Beyond Brazil, traders and roasters said America, Eastern
Europe and the Middle East could also see some switching, the
trader said, noting that emerging coffee markets were less
sensitive to taste changes.
"In emerging countries people go more for price than
anything else; they are not so picky quality-wise," the head of
coffee at an international trade house said, adding that the
Western European market was not as flexible.
Robusta coffee futures traded at a three-year low
this week, but traders were more bullish on their price outlook
versus arabicas, pointing to low exchange stocks as a trigger
for future price rises to attract fresh beans.
In September brokerage Marex Spectron forecast 2013/14
global coffee supply and demand at close to balanced, after a 7
million bag surplus - all in arabicas - the previous year.
Brazil's coffee production rises and falls from one year to
the next due to its biennial cycle, as arabica trees need time
to recover after bearing large quantities of cherries.
The variations between 'on' and 'off' years have been
diminishing, however, partly due to improved maintenance,
replanting of trees with higher-yielding varieties and increased
use of fertiliser and irrigation.
The International Coffee Organization has not yet published
forecasts for 2013/14. It estimated 2012/13 global production at
145.2 million bags, of which around two fifths is robusta. The
ICO pegged world consumption for calendar year 2012 growing 2.2
percent to 142 million bags.
Future demand growth is expected to be focused in Asia, the
region where most of the world's robusta is grown, and where
coffee is mostly consumed in the form of soluble or instant.
"I don't think that (the switching) means robusta demand is
falling. I think demand in Asia is strong enough that it more
than cancels any of that out. Both robusta and arabica demand
will grow this year," a trader said.