Monday, May 27, 2024

Robusta futures prices rally on reduced crop prospects worldwide

MILAN – Robusta coffee futures rallied on Tuesday to their highest levels since the third decade of June on reduced crop prospects in Brazil. The front month closed up $106 at $2,759. The most active contract for March delivery gained $102 to end the day at $2,724. Lack of rain and above-average temperatures could dent the crop outlook in regions such as Espírito Santo, the main Brazilian producer of Robusta.

Fernando Maxiliano, a coffee analyst at broker StoneX quoted by Reuters, said Brazil Robusta outlook has deteriorated despite widespread irrigation systems.

“Some municipalities declared state of attention due to low water reserves. If governments impose limits to irrigation, then it would be a bigger problem,” he added.

Production is already expected to be 15% to 20% lower than initial estimates, said Edimilson Calegari, general manager at Cooabriel, an Espirito Santo-based cooperative, quoted by Bloomberg.

If such a forecast becomes true, it would mean the smallest crop since at least 2020, with output coming below 20 million bags.

Meanwhile, the General Department of Customs (GDC) reported that Vietnam exported 80,000 tons of coffee in November, worth $252 million, down 37.9% in quantity and 17.5% in value compared with November 2022.

Prior to that, Vietnam’s coffee export volume in October was at a record low, just 43,720 tons, valued at $157.6 million, or a 48.8% decrease in quantity and 28% in value compared with the same period last year.

Harvest operations are in full swing in the Central Highlands.

The US Department of Agriculture (USDA) predicted that Vietnam’s coffee output in the 2023-2024 crop would decrease to 27.8 million bags from 31.3 million bags in May 2023.

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Indonesia, the world’s third largest producer of Robusta, is also struggling with negative weather.

USDA has forecast that Indonesian coffee output will decrease by 18.14% to 9.7 million bags.

Following Monday’s rally, ICE Arabica’s main contract for March delivery rose 0.6% yesterday to $185.25 per lb.

The certified Arabica coffee stocks held against the New York Exchange rose slightly, to register at 240,974 bags yesterday.

The levels of the certified stocks have gradually drawn down to a historic low in a combination of consumer spot demand and low new deliveries to register to the certified stocks as participants resist the comparatively low-priced exchange traditionally a channel used by the industry, as buyer of last resort, says I. & M. Smith in its latest report.

The very low certified stocks are interpreted by the speculative sector of the markets, as an indication of Arabica coffee availability, or lack thereof, in the consumer markets where these exchange certified coffee stocks are held.

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