Saturday 15 June 2024
  • La Cimbali

Coffee futures markets rose sharply on Friday on renewed weather concerns in key coffee areas of Brazil and Vietnam

The weather situation in Minas Gerais was once again Ice Arabica’s main driver. This Brazilian state, which is the country's largest Arabica-producing region, has seen very little rain for weeks. On the other hand, the dry weather is favouring Robusta harvesting, which is in full swing.

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MILAN – The weather developments in Brazil and Vietnam once again took centre stage in the coffee futures markets, dictating a sharp change in sentiment in the last session of the week, which ended with a strong rally both in New York and London. Rainfall data from Brazil and Vietnam, which continues to paint a worrying picture, kept traders on edge.

The biggest gains were seen in New York: July Arabica contract rose 4.4% (+870 points) on Friday 17th to close at 206.60 cents, its highest level in over two weeks.

Buying activity intensified as the 203 cent level was breached, adding further impetus to the rally, which took the benchmark to an intraday high of 207.15 cents.

Analysts say we will have to wait until the end of today’s session to see if we are in for a real reversal of the trend.

The weather situation in Minas Gerais was once again Ice Arabica’s main driver. This Brazilian state, which is the country’s largest Arabica-producing region, has seen very little rain for weeks.

On the other hand, the dry weather is favouring Robusta harvesting, which is in full swing.

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According to Safras & Mercado, 16% of this year’s planned production of Robusta (21% in Rondônia) had been harvested, as of 14 May.

The Arabica harvest was 7% complete on the same day, compared to 4% a year ago and 6% of the 5-year average. Safras & Mercado estimates the Brazilian 2024/25 crop at 70.37 million bags.

Meanwhile, Itaú BBA, part of the Brazilian banking group Itaú, confirms its estimate for this year’s Brazilian crop of 69.4 million.

According to Fundação Procafé, the 2024 crop will also be higher than the previous year’s, but will face “numerous challenges.”

‘What is striking, in general, is the smaller screen size of the beans, which will have a significant impact on yields,’ explained Alysson Fagundes, researcher and agronomist at the Foundation, adding that this is particularly evident in Minas Gerais.

According to Fagundes, this is a consequence of the unfavourable weather conditions recorded in the coffee belt between October and December, which adversely affected the development of the new crop.

The current weather situation also remains worrying in Vietnam’s Central Highlands, where – according to the National Meteorological Agency – rainfall levels remain 41% below historical averages for the period.

This still uncertain and worrying picture helped to send the London exchange soaring: the Ice Robusta contract for July delivery rose $98 (+2.9%) on Friday to close at a two-week high of $3,518.

Both coffee futures markets are in backwardation, reflecting strong speculative tensions across the board.

CIMBALI

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