Robusta Coffee Gains on Easing Credit Concerns, Dollar Weakness

By Marianne Stigset

Oct. 14 (Bloomberg) -- Robusta coffee advanced in London on speculation central banks' efforts to ease the credit crisis will spur demand for commodities. White sugar also gained.

The U.S. will invest about $125 billion in nine of the nation's biggest banks, while France, Germany, Spain, Austria and the Netherlands have committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and buy stakes in lenders. Stocks rose worldwide, with Japan's Nikkei 225 gauge climbing the most ever.

``It's mostly outside influences, with stocks gaining'' that are buoying coffee prices, Ryan Bennett, a cocoa and coffee trader at Sucden(U.K.) Ltd. in London, said by phone.

Robusta for January delivery rose $36, or 2 percent, to $1,850 a metric ton as of 2:22 p.m. on London's Liffe exchange. The beans have declined 3 percent this year, outperforming the 11 percent drop in the UBS Bloomberg CMCI index of 26 raw materials.

U.S. Dollar Index, a gauge that includes the euro, fell for a second day. Commodity prices measured by the Reuters/Jefferies CRB Index of 19 raw materials gained 3 percent yesterday after plunging 20 percent in the past two weeks as banks failed, credit markets froze and the outlook for the global economy worsened.

The cost of borrowing in dollars for three months dropped to 4.64 percent, from 4.75 percent today, the British Bankers' Association said. The London interbank offered rate for three- month dollar loans surged to the highest this year on Oct. 10.

``A drop in Libor rates would signal that the interbank markets started working again, which would be very positive for commodities,'' Tobias Merath, head of commodity research at Credit Suisse Group, wrote in a note today, prior to the release of the new rates.

Global Demand

Growth in global coffee demand may surpass 1.7 percent this year, rising to a record, the International Coffee Organization said on Aug. 8. Consumption may exceed 126.5 million bags in 2008, compared with 124.4 million bags last year, the ICO said.

Output worldwide in the year starting Oct. 1, 2008, will climb 8 percent to 128 million bags, from an estimated 118.1 million bags in the current year, the ICO said. A bag weighs 60 kilograms (132 pounds).

Coffee bean exports from Indonesia, Asia's second-largest grower after Vietnam, may fall 29 percent this year as farmers hoard the crop in the hope of selling later at better prices, a trade official said.

The nation's farmers, who mainly grow the bitter-tasting robusta bean, may export 250,000 tons in 2008, compared with 350,000 tons last year, said Rachim Kartabrata, executive secretary of the Indonesian Coffee Exporters Association.

Cocoa Usage

Cocoa futures for December delivery fell 2 pounds, or 0.2 percent, to 1,365 pounds ($2,397) a ton on Liffe.

European cocoa bean usage fell in the third quarter, the first quarterly decline since 2004, the European Cocoa Association said today in a report. Chocolate makers processed 348,501 metric tons in the quarter, compared with 351,040 tons a year ago, the Brussels-based group said.

Cocoa traded on the Liffe exchange in London fell 16 percent in the third quarter, the worst performance since the second quarter of 2003. Stockpiles in warehouses monitored by the exchange rose from 111,380 tons to 163,290 tons in the period.

White sugar for March delivery climbed $1.90, or 0.6 percent, to $345.20 a ton.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net