London, August 28 - London's robusta coffee contract faces a new American rival with only one survivor expected and the U.S. may have the edge, European traders said on Monday.
"I don't think they can run side by run. London will have difficulty competing with the efficiency of the New York market," Stephan Loots, consultant with Antwerp-based SA Sucre Export, told Reuters.
The New York Board of Trade said on Monday it will launch a robusta coffee contract on the IntercontinentalExchange's screen starting September 28.
NYBOT, which already has a successful contract for arabica coffee, is launching robustas just ahead of the harvest in top robusta producer Vietnam which normally starts in October.
"It seems to be a logical step," soft commodity analyst Gary Mead of VM Group said.
A spate of new commodity contracts was launched on lower cost electronic trading platforms this year by NYBOT, Euronext.liffe and NYMEX as the major commodity exchanges seek to grab market shares and boost their revenues.
Euronext.liffe spokesman James Dunseath noted robusta coffee had been one of the the exchange's most successful contracts over the past year.
Volume and open interest records have been set in futures and options, according to exchange data.
"However, we are never complacent and are in regular contact with our customers to ensure the contract meets their needs," he said in a statement.
The New York contract will have a lot size of 17 tonnes, the same as its arabica market but much larger than London's current five tonnes.
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Traders said the larger contract size could deter interest from small speculators but pave the way for more trading of the premium between arabica and robusta coffee.
Robusta coffee is mostly grown in southeast Asia. It traditionally is used to make soluble or instant coffee and normally trades at a discount to arabica.
"It will make arbitrage easier," one European coffee analyst said.
He also questioned whether the two robusta contracts could both flourish, adding it was uncertain how aggressively euronext.liffe would be willing to compete.
"There is not enough to differentiate them to keep the two of them going," the analyst said.
He noted that physically deliverable commodities represented a small proportion of the European exchange's business and did not appear to be its central focus.
European physical coffee traders had expressed concerns in the past about the London contract with complaints including rules related to regrading of old coffee and the way the exchange handled moisture problems which emerged last year with supplies stored in the Italian port of Trieste.
"I think there have been issues with London sometimes," the coffee analyst said.
Euronext.liffe responded in late July by issuing a notice suspending the listing of the March 2009 and subsequent delivery months pending the introduction of contract revisions.
The exchange said it was considering revising quality criteria, rules related to the delivery of re-bagged bulk coffee and sampling and grading procedures.
"I fear it is a bit too late," Loots said.