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Arabica coffee futures rally to ten-year highs

Intercontinental Exchange coffee futures prices

MILAN – Arabica coffee futures rallied to new 10-year highs on Tuesday on tight supply worries, bullish forecasts from coffee analysts and global logistics problems. The contract for March delivery rose nearly 4% to 242.05 cents per lb, the highest level for the second position contract since November 2011. The Ice Robusta contract for January delivery closed up +$46 to a new multi-year high of 2,297.

Signs of smaller global Arabica supplies are fuelling fund buying of coffee futures.

Dealers said roasters are rushing to buy having collectively given up on the hope that prices will fall.

They also noted nearby coffee futures are moving to backwardation, indicating supply tightness.

On Monday, the USDA‘s Foreign Agricultural Service (FAS) projected that Brazil’s 2021/22 coffee exports would tumble -27% y/y to 33.2 mln bags from a record 45.67 mln bags in 2020/21 drought and frosts curbed coffee production.

The Agricultural Trade Office (ATO)/Sao Paulo estimate for the Brazilian coffee production for Marketing Year (MY) 2021/22 (July-June) remains unchanged at 56.3 million 60-kg bags, a significant decrease of 19 percent compared to last year’s record output of 69.9 million bags.

No official forecast has been announced for the MY 2022/23 coffee production. However, the initial expectations of a record crop were undermined by the prevailing below-average rainfall volumes up to September 2021 and severe frosts that affected Arabica production growing areas in June/July.

Coffee exports for MY 2021/22 are projected at 33.22 million bags, a sharp drop of nearly 12.5 million bags from all-time record exports of 45.67 million bags in MY 2020/21, due to expected lower product availability.