MILAN – Coffee futures prices skyrocketed Tuesday on strong fund buying due to concern over low stocks in major consuming countries and unfavourable weather in Brazil’s main coffee growing region. In New York, the main contract for March delivery closed almost 6% higher at 202.40 cents per lb, the highest level since last June.
In London March Robusta coffee futures prices settled up $136, or 4.9%, at $2,932 a metric ton after hitting a 15-year high of $2,952. Fear that the ongoing dry weather in Brazil may damage coffee crops sparked fund buying.
On Monday, Somar Meteorologia reported that Brazil’s Minas Gerais state, the country’s main Arabica regione, received only 35.1 mm of rainfall in the past week, or 65% of the historical average.
The Robusta market is also supported by the unfavourable weather in Brazil’s most important Robusta growing region of EspÃrito Santo.
Brokers quoted by Reuters reported strong buying from speculators, saying the movement puts pressure on trading houses that are usually short in the market and might have to liquidate some positions to escape high margin calls.
Importers of coffee to the European Union are starting to scale back purchases from small farmers in Africa and beyond as they prepare for the implementation of the new a landmark EU law on Deforestation-free products.
Industry sources said the cost and difficulty of complying with the EU Deforestation Regulation (EUDR), which comes into force late in 2024, will have a serious impact on coffee trade and reshape the global commodities markets.
They warned that sourcing strategies being adopted by companies in advance of the law risk increasing small scale farmer poverty and raising prices for EU consumers, while also undermining the EUDR’s impact on forest conservation, reports Reuters.
This could have serious consequences in countries like Ethiopia, where some 5 million farming families rely on the crop.
