Saturday 15 June 2024
  • La Cimbali

Coffee futures markets sharply down in the last session of the week

On the fundamentals side, traders' concern about the crop prospects in Brazil and Vietnam remains palpable. Estimates and statistics, however, paint a contradictory picture, with assessments also varying widely from source to source

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MILAN – There was a sharp downward correction in the last session of the week on both coffee futures markets, with London and New York posting similar losses of 3.9% and 4% respectively. On Friday the 7th, the contract for the September delivery of the Ice Robusta lost $ 166, ending the day at $ 4,128. This price, however, marka a 3.5% recovery from the previous Friday.

On the other side of the pond, Ice Arabica’s contract for July delivery lost 940 points to end the week at 224.80 cents, up 245 points on the previous Friday. Also of note was the re-establishment of a slight contango between the first and second position as the first notice day approaches, resulting in an intensification of rollovers to later months.

On the fundamentals side, traders’ concern about the crop prospects in Brazil and Vietnam remains palpable. Estimates and statistics, however, paint a contradictory picture, with assessments also varying widely from source to source.

Usda, for instance, is optimistic about the harvest prospects in Vietnam and expects production in 2024/25 to be more or less in line with the current year, at around 29 million bags.

Volcafe takes an entirely different view. According to the Swiss trader, poor rainfall has done irreversible damage to crops, which will results in the next harvest to falling to 24 million bags, the lowest volume in 13 years.

Volcafe also predicts a global robusta supply deficit of 9 million bags in 2023/24 and a further deficit, the fourth in a row, of 4.6 million in 2024/25.

Gimoka

A further wake-up call came this week from an Afp interview with Nguyen Nam Hai, president of the Vietnam Coffee and Cocoa Association.

“The heat and the drought has greatly impacted coffee trees’ development and growth,” he said, with farmers hard-pressed to find alternative water sources.

The situation is particularly serious in Gia Lai, where high temperatures and low rainfall have led to the proliferation of cochinilla.

“The burning heat and the cochinilla damage coffee branches, shrinking the coffee cherry and impacting their quality,” Hai said.

It is worth noting that, world coffee exports in all forms in the first seven months of the current year (October-April) – according to Ico – were up by 11.1% compared to the same period in 2022/23, close to 81 million bags.

Dry weather continues to favour the progress of coffee harvest in Brazil, which is also gaining pace for Arabica coffee. According to the weekly monitoring by SAFRAS, through May 28, 21% of the 24/25 crop had already been reaped.

The conillon harvest reaches 30% of the expected production, with Rondônia standing out with 41% of the reaped crop. The perception of lower-than-expected yield remains, which leaves room for a downward revision in the production estimate, says SAFRAS. Regarding Arabica, the harvest is 16% complete.

The expectation for Arabica is a larger crop than last year’s, although the smaller bean size observed in the first processed batches is quite worrying, SAFRAS points out.

The official Conab estimate forecasts a harvest of 58.81 million bags. Usda sets the bar much higher and anticipates a harvest of 69.9 million, in line with that of 2020.

Safras & Mercado is even more optimistic, with a production forecast of 70.37 million for 2024/25.

However, many insiders expect these estimates to be revised downwards in the coming months.

CIMBALI

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