Thursday 05 October 2023

Ice Robusta futures reach 11-year high on dry conditions in Vietnam, speculative buying

Must read

MILAN – Robusta coffee futures eased Friday from multi-year highs reached on Thursday. Arabica futures were also marginally down from a six-month peak reached the previous day. A recovery in the dollar index from an 11-1/2 month low sparked long liquidation in both markets. July Robusta coffee in London settled $50 up, or +2.1%, at $2,382 a tonne on Thursday after setting a 11-1/2-year high of $2,401.

Analysts said the market was supported by tight supplies, particularly in top Robusta producer Vietnam.

Dealers said there was also concern that dry conditions in Vietnam could dent the outlook for the 2023/24 crop, as reported by Reuters.

Moreover, the Association of Indonesian Coffee Exporters and Industries reported recently that Indonesia, the world’s third-largest Robusta producer, would see its 2023 coffee production fall 20% on-year to 9.6 million bags due to damage from excessive rainfall across its growing regions.

Ice Arabica’s most active contract for July delivery fell by 290 points on Friday to end the week at 191.50 cents per lb, after setting a six-month high intraday of $198.10 cents on Thursday to settle at 194.40 cents at the end of the day.

Tighter stockpiles are also supportive. Certified washed Arabica coffee stocks held against the New York exchange Friday fell to a 4-month low of 710,687 bags.

Coffee prices also have support as the odds of an El Nino weather event increased. Experts pointed out that it is still uncertain how strong the coming El Niño will be – some models predict it could attain super-strength while some expect it to be moderate.

If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting coffee crop production.

An excessive long position in Robusta coffee futures could fuel long liquidation pressures, says Barchart. In fact, Friday’s weekly Commitment of Traders (COT) data showed funds boosted their net-long positions rose by 5,642 in the week ending April 11 to a 13-month high of 32,402 long positions.

In other news, May raw sugar hit an 11-year high of 24.85 cents on Wednesday, been driven partly by lower-than-expected 2022/23 crops in India, China and Thailand.

July London cocoa reached a 6-1/2-year high of 2,206 pounds the same day. Dealers said the European first-quarter cocoa grind was slightly above expectations, with a 0.5% year-on-year rise.

Adverse weather conditions negatively impacted most major producers, particularly Côte d’Ivoire in West Africa and Ghana, which together account for more than 60% of global output.

Latest article