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Arabica futures surge 5.5% on strike in Brazil, possible delays in gradings

Arabica futures

MILAN – Arabica coffee futures prices in New York surged 570 point (+5.5%) on Wednesday bucking the general trend in financial markets. The most active contract for May delivery closed at 108.30 cents after reaching an intraday high of 114.10 cents.

London rebounded from Tuesday’s lows. The benchmark contract for May delivery rose US$15 to US$1,227.

The spike in prices was triggered by news of an indefinite strike at Brazil’s Santos port, which is responsible for over 80% of the country’s coffee shipments.

In addition to that, the coronavirus has disrupted grading at the ICE Arabica Exchange, which prompted ICE to say that it can no longer ensure that the sampling and grading process will be completed in time for the expiry of the May coffee futures contracts.

U.S. coffee supplies are ample. The Green Coffee Association on Monday reported that U.S. Feb green coffee inventories rose +0.8% y/y to 6.312 mln bags.

February coffee exports jumped +19.8% m/m to 173,789 tons or 2,896 60-kg bags, Vietnam’s General Statistics Office reported on Wednesday. Cumulative exports for Jan-Feb period are up 1.0% y/y to 319,207 MT.

The National Center for Hydro-Meteorological Forecasting said Tuesday that the Vietnam Central Highlands, the country’s major coffee-growing region, continues to see little rain and is likely to face drought from April to mid-May.

Vietnam’s domestic coffee prices slipped this week due to growing concern over the Coronavirus, while trading activity in Indonesia remained slow as traders await new supplies, traders said on Thursday.

Farmers in the Central Highlands, Vietnam’s largest coffee-growing area, sold coffee at VND31,100 ($1.34) per kg versus VND31,500 last week.