Saturday 15 June 2024
  • La Cimbali

Coffee futures prices rebound on tight supply with Robusta (+11%) close to monthly highs

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MILAN – Robusta coffee futures prices rebounded again last week. Tight supply and the severe drought in Vietnam led to a resurgence in the London market, with prices approaching the monthly highs reached in early May. In a week marked by the release of new estimates and statistical reports on top coffee-producing countries, both markets rallied.

London’s rally (+10.6% on week) also helped support New York, which in turn rose by 5.6%.
July ICE robusta coffee gained $73 on Friday, 24 May, closing at $3,892, its highest level since the beginning of the month.

In Thursday’s session, it reached an intraday high of $3,994, approaching again the $4,000 per tonne mark.

New York coffee futures experienced a more mixed performance. The main contract for July delivery soared to a high of 220.45 cents in Wednesday’s session, only to lose almost 2.2 per cent (480 points) on Thursday, helped by Conab’s new official forecast that raised estimates of the 2024/25 Arabica crop.

Both markets will observe a day of closure today, Monday 27 May: the Ice Arabica for the observance of the Memorial Day holiday and the Ice Robusta for the Spring bank holiday.

Market players are monitoring with concern the situation in Vietnam, where recent rains have only partially alleviated the severe water deficit caused by drought and high temperatures, mainly a consequence of the El Niño phenomenon.

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Volcafe released last Wednesday a very pessimistic report on Vietnam. The Swiss trader claims that the shortage of rainfall has caused ‘irreversible damage’ that is bound to heavily affect the 2024/25 harvest, which Volcafe forecasts at only 24 million bags: the lowest in 13 years.

The reduced use of fertilisers and the expansion of durian crops at the expense of coffee will also contribute to this heavy drop in production.

This will lead to a new global Robusta deficit in 2024/25, which would be the fourth in a row. It is worth mentioning that the deficit is expected to be “only” 4.6 million bags, compared to the 9 million bags deficit that Volcafe expects for 2023.

The outlook for Arabica is more promising, with supply expected to outstrip demand in the 2024/25 season. However, the surplus is projected to be a mere 700,000 bags.

As previously indicated, Conab has revised its forecast for the upcoming Brazilian Arabica crop.

On the other hand, the most recent reports from the US Department of Agriculture’s Foreign Service present a rather mixed picture. Production is expected to recover in Colombia, Peru, Mexico and Nicaragua.

Conversely, the outlook appears negative for Guatemala, Costa Rica and especially Honduras, where production is expected to fall by almost a quarter (-24%) to just 5.5 million bags.

CIMBALI

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