Thursday 01 December 2022

Arabica coffee futures fall to a new 16-month low of $1.5675 on improved supply prospects

The contract for December delivery closed down 945 points to a record low of 156.75 cents. In London, the Ice Robusta main contract for January delivery closed $22 down to $1,802. In the past month alone, Arabica coffee futures plummeted by 22%. Robusta futures were down by 15%

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MILAN – Coffee futures prices fell sharply on Tuesday on speculative selling due to improved supply prospects and concerns about the international situation, global recession headwinds and their potential impact on consumption.

The contract for December delivery of the ICE Arabica closed down 945 points to a new 16-month low of 156.75 cents. March Arabica coffee fell 740 points, or 4.4% down, to 159.50 cents, having hit its weakest in more than 15 months at $1.5660.

According to reports, premiums for December coffee had helped prompt large inflows of physical stock into ICE-approved warehouses. However, there is speculation that they are old bags of coffee taken out of ICE stocks for regrading and re-certification before re-entering ICE warehouses as new coffee stocks.

ICE certified coffee stocks were unchanged at 468,291 bags as of Nov. 15, but there were 598,716 bags pending grading, mostly in Antwerp.

In London, the Ice Robusta main contract for January delivery closed $22 down to $1,802.

The latest Commitment of Traders report from the New York Arabica market – issued on Monday – has seen the Non-Commercial Speculative sector increase their net short position over the week of trade leading to Tuesday 8th. November 2022 to register a new net short sold position of 19,338 lots.

The latest Commitment of Traders report from the London Robusta coffee market has seen the Speculative Managed Money Sector increase their net short position to a new net short sold position of 23,516 lots.

In Brazil, precipitation has exceeded seasonal averages over the past 45 days, according to data cited by the WSJ. The US National Weather Service projects that wet weather in the area will continue, leading many to assume that coffee crops will do well and supply will increase.

In the past month alone, Arabica coffee futures plummeted by 22%. Robusta futures were down by 15%.

Rabobank last week projected Brazil’s 2023/24 coffee crop would climb 8% to 68.25 mln bags. The Dutch bank also said a global coffee surplus could be seen in 2023/24, as consumption is expected to slow down from an economic recession and energy crisis.

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