Saturday 15 June 2024
  • La Cimbali

Coffee futures markets rally on weather problems nearing last month’s record price highs

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MILAN – Coffee futures markets reopened with a bang Tuesday, after Monday’s close for the Memorial Day in New York and the Spring Bank Holiday in London. In last week’s recap, we had noted a trend reversal taking shape with both markets close to monthly highs. When trading resumed yesterday, the upward trend was confirmed and reinforced, reflecting the continued uncertainties hanging over the markets.

This led to a sharp increase in both London and New York. In London, the main contract gained $228 (+5.86%) to close at $4,120, nearing the 40-year highs reached in the second half of April.

In New York, the contract for July delivery gained 1,270 points (+5.82%) to close at 230.95 cents, the highest level for the benchmark since the end of the second decade of April.

Meanwhile, a further increase Ice Arabica certified stocks was reported, which reached a total of 778,321 bags yesterday, the highest level in 15 months.

Brazil remains the most important origin, with 387,770 bags. Honduras follows, with 132,191 bags. Peru (94,125 bags) and Nicaragua (80,251 bags) also made significant contributions.

A further 41,655 bags are pending certification. Almost all stocks are stored in the European ports of Antwerp (721,937 bags) and Hamburg (50,795 bags).

Gimoka

The overall fundamental picture in coffee futures markets has not changed and yesterday’s strong rally mainly reflects the high level of market volatility due to a highly uncertain outlook, particularly on the Robusta side.

Last week, Conab raised its estimate for Brazil’s 2024/25 Arabica crop, but also revised downwards its forecast for Robusta production.

In Vietnam, Volcafe expects the next harvest to be the worst in 13 years, due to poor rainfall that has caused “irreversible damage” to coffee blossoms. . In Indonesia, production is expected to recover after last year’s sharp decline.

Still talking about Vietnam, where domestic coffee prices are surging again, the coffee sector is facing a boom in durian, whose cultivation area has grown at a rate of 25% per year over the past five years and now stands at around 110,000 hectares.

By way of comparison, coffee cultivation covers just over 600,000 hectares in Vietnam. The success of durian cultivation is becoming something of a gold rush for Vietnamese farmers.

According to local media, a hectare planted with fruit trees can yield an income up to 10 times bigger than that generated by an equivalent area planted with coffee or rice.

Durian exports are mainly headed to China, which accounted for 91% of world demand in the past three years (source: Hbsc). In order to understand the commercial interest generated by this fruit, suffice it to say that its export brought 2.1 billion dollars into Vietnam’s coffers last year, more than 10 times as much as the year before.

The value of Vietnam’s coffee exports amounted to US$ 4.18 billion in 2023.

CIMBALI

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