Coffee faces ‘bullish risk’ on Colombia, Morgan Stanley says

Coffee-supply disruptions in Colombia and relatively low stocks of the arabica variety means there’s “little buffer” for problems with the next harvest, analysts at Morgan Stanley led by Hussein Allidina wrote.

“Tight arabica stocks and a poor Colombian production outlook are key bullish risks,” the analysts wrote in a report e-mailed today. “With supply constrained through the start of the Brazilian 2012 harvest in April, demand strength will continue to determine price resilience.”

Colombia “will likely struggle” to produce 8.1 million bags of coffee in 2011-12 because of disease and transport problems, compared with 8.9 million bags the previous year and a forecast of 10 million bags from the country’s coffee federation, the analysts said.

Arabica coffee futures have climbed 13 percent in the past 12 months to $2.2820 a pound in New York, while those for the robusta variety traded in London rose 7.1 percent in the period.

Robusta beans are used in instant coffee and are harvested in Asia and parts of Africa. Arabica beans are grown mainly in Latin America and are brewed by specialty companies including Starbucks Corp.

“With increased arabica production slated to come out of Brazil and robusta production out of Vietnam, the impending supply outlook is bearish, particularly with slowing global growth,” the analysts wrote.