Wednesday 21 February 2024

Futures prices are pressured down by improved crop prospects, Wuhan flu threat

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MILAN – ICE Arabica coffee futures prices for delivery in March fell 4.7 cents, or 4.6%, on Monday to 97.95 cents per lb after touching a 3-1/4 month low of 97.85 cents prior in the session. March Robusta futures prices in London fell by $44 to $1,290, the lowest level for the main contract since November 1st.  An increase in ICE-certified Arabica stocks this year, coupled with a potential record crop in Brazil and overall pressure on commodities due to the Wuhan flu threat, are weighing on coffee.

In addition to that, prices were pressured down by the appreciation of the US dollar against the Real, with the Brazilian currency reaching new lows last Friday.

ICE-monitored Arabica coffee inventories on Thursday climbed to a 2-1/4 month high of 2.179 mln bags, recovering from the mid-Dec 1-1/2 year low of 2.022 million bags.

Speculators cut their net long position by 7,179 contracts to 6,529 in the week to January 28, CFTC data showed.

Beneficial weather in Brazil should boost coffee yields and production. Meteorological Consultant Rural Clima said last Thursday that Brazil’s coffee crops face “exceptional” conditions for development.

Somar Meteorologia reported that rainfall in Minas Gerais, Brazil’s largest Arabica-coffee growing region, measured 43.6 mm in the past week, or 112% of the historical average.

Comexim last Tuesday projected that Brazil’s 2020/21 coffee crop will climb to a record 67.7 mln bags

A bearish factor for Robusta coffee is bigger coffee supplies from Vietnam,. Data from Vietnam’s Customs on Jan 13 showed that Vietnam’s December coffee exports jumped 66.8% on month and 22.7% on year to 188,246 MT. However, total 2019 Vietnam coffee exports fell -11.9% on year to 1.65 million MT.

In related news, a poll released by Reuters forecasts a Brazilian production of 66.9 million bags for the 2020/21 crop season. This would generate a global surplus of 2.5 million bags.

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