· More than 30,000 tonnes of conillon tendered
· A year ago only Vietnamese robustas were tendered
By David Brough
LONDON, May 19 (Reuters) - A large tonnage of exclusively Brazilian coffee has been tendered against the May robusta futures LRCK5 contract on the ICE exchange, creating a challenge for European roasters who do not usually use beans from this origin in their blends.
According to the latest data from the ICE exchange, 3,060 10-tonne lots of conillon (Brazilian robusta) had been tendered, as of May 18. The contract is due to expire on May 29.
At last year's May expiry, just 761 10-tonne lots were tendered, all of it Vietnamese robusta. At this year's May expiry, no Vietnamese robusta was tendered.
European traders said a large volume of conillon was traded at a discount to London robusta futures last year when supplies were ample and has now been graded by the exchange, contributing to a sharp rise in certified stocks.
"The price of Brazilian conillon was very competitive, so people have been tendering a lot of conillon at (the) terminal (futures market)," a senior European physical trader said.
Certified exchange robusta stocks stood at 178,100 tonnes, as of May 11, sharply up from 50,760 tonnes as of May 29, 2014.
As Brazilian coffee consumption increased in recent years, European roasters turned increasingly to alternative Asian origins instead of conillon.
Traders said there was a risk that European roasters would be reluctant to take delivery of conillon.
While conillon is still widely used by U.S. roasters, European industry typically use Vietnamese or Indonesian robusta varieties in their blends.
"In Europe, some factories would have to make adjustments to blend conillon," one European physical trader said.
Another senior European trader said: "If you are selling conillon in a place where there is not a lot of demand, it could be leaning on the market for a long time."
Now conillon supplies in Brazil have tightened following a drought in January, which eroded new crop availability and underpinned domestic prices.
Traders said that if it was cheaper for roasters to take delivery of conillon than buy it at origin, the industry would take advantage of the lower prices to adjust their blends.
One senior trader said the multinational roasters in Europe would be the best placed to change their blending practices to accommodate conillon.
The increase in certified robusta stocks held in European warehouses, driven partly by an increased volume of conillon, has led to a big discount of prompt to second month futures LRC-1=R, signalling to the market that there was abundant immediate supply, traders said.