Saturday 25 June 2022

FUTURES MARKETS – Arabica prices spike to new highs

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MILAN – Arabica futures spiked to more than 2-year highs on Monday fuelled by the growing concern for the impact of the drought. The most traded contract, for May delivery, reached new highs at 206.85 before finally giving into profit-taking and origin selling for a close of 203.40, still up 3.3 percent on Friday’s close, and the highest level seen since March 2nd 2012.

Brazil’s coffee belt received less weekend rain than expected, raising the prospects of a global deficit.

Brazilian meteorologist Somar said no significant precipitation was expected until at least March 19.

The overall drought conditions remain and drier trends through the next 10 days will be less favourable, especially in Minas Gerais,” said Maryland-based MDA Weather Services in a report.

The cost of Arabica beans has doubled since November 2013. A Reuters poll released on Friday indicated the dry weather had cut forecasts for Brazil’s coffee crop in 2014/15 by more than 10 percent, with a median result of 48.9 million (60-kg) bags.

Analysts said the dry weather should also reduce the size of the 2015/16 crop, which had already been expected to be lower in the “off-year” of Brazil’s biennial crop cycle.

However, dealers said it still remained to be seen how much crop went lost. “There is a very wide range (of crop forecasts) at the moment and nobody really knows what the outcome will be,” Commerzbank analyst Michaela Kuhl said in an interview.

Kuhl said the market’s current mood was “something quite close to panic.”

“It is very difficult to forecast when this (rally) will end but we think prices of $2.00 per lb are overdone in the current situation,” she added.

Robusta futures in London climbed to a one-year peak on Monday.

May Liffe Robusta coffee reached an intraday high of 2,167 dollars and ended the day at $2,147 per tonne, or 2.3 percent higher.

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