Tuesday, May 21, 2024

Arabica coffee futures rally on new exchange rules in New York

MILAN – Arabica coffee futures exploded yesterday, with Arabica and Robusta reaching their highest levels in 5 and a half and three and a half months respectively. In New York, the main contract for March delivery gained 1,290 points to close at 184.70 cents, up 7.5% from the previous day.

Prices surged on the eve of the new rule that will come into effect today, which prohibits the resubmission of old coffee inventories.

This change will make even more difficult to replenish the exchange certified stocks that reached a new 24-year low of 224,066 bags on Thursday.

The market was also supported by adverse weather in top Brazil, including high temperatures, hail and storms, and that could affect the development of the 2024/25 crop.

However, in a positive note, hEDGEpoint Global Markets said Tuesday in a report that coffee production in Brazil could reach an all-time high of 74.24 million bags surpassing the previous record set in 2020/21. According to the broker and analyst, Arabica production will reach 48.31 million bags, while the Robusta output will near 26 million bags.

hEDGEpoint analyst Natalia Gandolphi said in the report that Robusta production in Brazil will rise sharply, thanks to a strong recovery in the main producing state of Espirito Santo state, despite a recent dry spell. Gandolphi also said that recent extremely high temperatures had only a limited impact on Arabica production.

In other news, the National Coffee Growers Federation in Colombia anticipated that the country’s coffee production will be between 11.60 million and 12 million bags at the end of 2023 calendar year. Colombia is forecast to produce 12.60 million bags during the current October 2023 to September 2024 coffee year, with a negative impact coming from El Nino weather phenomenon.

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The federation has set a goal of 14 million bags by the end of 2025 and 16 million bags by 2027, including a 20% yearly renewal of coffee plantations.

Futures prices rallied also in London, where the contract for January delivery ended the day at $2,611, up $88, or 3.5% from Wednesday. Prices were also affected by heavy rains that are disrupting bean processing in key growing regions in Vietnam. Vietnam coffee production for CY 2023/24 is expected to fall to a four month-low, due to the drought earlier this year.

Vietnam’s General Department of Customs reported Wednesday that the country’s coffee exports for the month of November fell 37.9% to 1.33 million bags. Shipments in the first eleven months of this year amounted to 23 million bags, a 12.9% decrease over the equivalent period of 2022.

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