Thursday 05 October 2023

Robusta futures cross again the $2,600 mark, New York recovers from recent lows

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MILAN – Robusta coffee futures crossed again the $2,600 mark on Thursday nearing recent highs. The main contract for July delivery gained $49 (+2%) to close at $2605 having hit a 15-year peak last week. Ice Arabica bounced back from recent lows and rose to a 1-week high of 183.05 cents per lb.

Tight supply in leading Asian producing countries support the London terminal market.

Traders and analysts expect the shortfall to last through next year, due to lower exports from Vietnam and Indonesia, while Brazil’s new conillon crop is expected to decrease from last year’s record volumes.

Coffee trading in Vietnam remains sluggish, preliminary export data show a 2.2% decrease in the first five months of 2023 from a year earlier to 882,000 tonnes, or 14.7 million.

Local traders expect output to decline next season as farmers continue to switch to growing other crops, such as durian, avocado, and passion fruit, especially in the Dak Lak and Gia Lai provinces.

One should note, however, that the latest Gain Report from USDA’s foreign Foreign Agricultural Service forecasts total coffee production in MY 2023/24 to increase to 31.3 million bags thanks to favourable weather conditions and higher yields.

In addition, farmers are steadily replanting coffee trees with new cultivars that have better productivity and disease resistance capabilities, says the report.

Indonesia said it exported 7,273.8 tonnes of Sumatra Robusta coffee bean in April, down 46.7% on year.

“There is a major risk of a squeeze in Arabica futures, maybe in July or September,” Carlos Mera, head of coffee analysis at Rabobank, was reported as saying said during a call with investors.

This could results in spikes in the prices in the days close to the expiration of the contracts.

Certified Arabica stocks are this week at their lowest since December, and are unlikely to be replenished any time soon because there is limited supply of that type of coffee in the market and stocks available are priced above the futures, so that there is not incentive to deliver.

Mera said that the most likely outlook is that only around December fresh bags of arabica coffee will arrive at the exchange, possibly semi-washed coffees from the Brazilian 2023/24 crop, reports Reuters.

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