MILAN — Coffee futures started the week with a bang. Yesterday, Monday 14th October, the Ice Arabica contract for December delivery gained 1,000 points (+4%) to close at 262.05 cents, at its highest since 1st October. In London, January gained 3.5% to close at $4,843, its highest level since 2nd October.
There were technical and fundamental factors at play in this new surge in coffee futures prices. The sentiment was certainly influenced by the Cot reports published last week, which showed a sharp reduction in long positions in both markets.
In New York, the Managed Money funds decreased their net long position by 12.41% over the week of trade leading up to Tuesday 8th. October 2024 to register a new long position at 52,367 lots.
In London, the Speculative Managed Money Sector decreased their net long position by 6.02% over the same period to register a new net long position of 32,137 lots, which is the equivalent of 5,356,167 bags.
However, the biggest boost to the markets came from a survey of five traders and sector representatives on the upcoming 2024/25 Vietnamese crop.
According to the survey, the coffee crop in Vietnam may fall up to 10% in the new season, due to the country’s worst drought in nearly a decade, which lasted between March and early May.
“Although rains returned in May, the drought’s detrimental effects were not entirely offset. Some trees perished, while others did not yield much,” the Mercantile Exchange of Vietnam’s deputy chief Nguyen Ngoc Quynh said in an interview with Reuters. He expects a 10% fall.
Trinh Duc Minh, the head of the Buon Ma Thuot coffee association, predicted output would fall by 5.4% in the 2024/25 season.
Europe-based traders expected falls of as little as 3.4%, but even that would be significant because it adds to the global Robusta shortage.
The unprecedented surge in Robusta prices is causing Arabicas to regain market share, some insiders claim. But this correction will take time, given the industry’s procurement strategies, which schedule purchases many months in advance.
“Demand is shifting back (to Arabica) now, but there’s always a lag,” said a second Europe-based trader, who spoke on condition of anonymity, quoted by Reuters.
