MILAN – The week ended with a bang in the coffee futures markets, with New York above the three-dollar mark and London returning to the five-thousand-dollar area, against a backdrop of uncertain production prospects in Brazil and Vietnam and the still unresolved issue of the postponement of the Eudr., which cannot yet be taken for granted.
On Friday 22 November, a strong recovery in prices was seen, which propelled both coffee futures markets to new highs. In New York, March Arabica coffee rose 2.2 per cent (+640 points) to close at 302.10 cents, a new record high since May 2011.
In London, the main contract for January delivery gained 4.1 percent (+198) to end the week at $4,985, after having broken through the $5,000 barrier during trading. This is the highest level for the benchmark contract since early October.
The fundamentals remain uncertain: in Brazil, drought has caused irreversible damage to the 2025/26 crop, whose potential is already reduced.
Dealers quoted by Reuters said the run-up in prices had been fuelled by concerns about next year’s crop in Brazil with reports that trees have relatively low numbers of the cherries which contain the coffee beans.
“We revise up our three-month target for arabica coffee to $3.10/lb, and note a significant upside risk skew to this forecast as supply from Brazil and Vietnam could still underperform,” said Citi in a note to clients.
Meanwhile, the US Department of Agriculture (Usda) cut its estimate of the 2024/25 crop by 3.5 million bags to 66.4 million, slightly above the previous crop.
In Vietnam, harvesting operations are in full swing: production is expected to further decline compared to last year.
Still on the statistical front, Usda has revised upwards by more than half a million bags its 2023/24 Colombian production estimate to 12.76 million and is also moderately optimistic about the current year, for which it expects a further increase to almost 13 million bags.
Harvests are seen stable in India, where the US ministry estimates 2023/24 production at just over 6 million bags and this year’s at 6.2 million.
In contrast, USDA is negative on Indonesia, where it has lowered its estimates to 7.65 million for last year and 10 million for this year.
Uncertainty also remains over the tortuous process for the postponement of Eudr implementation.
The EU Parliament and Council failed to reach a compromise last Thursday. The next round of negotiations is currently scheduled for Dec. 3, 2024.
If it ends with an agreement, the law on postponement could be passed just before the originally scheduled start of application on Dec. 30. If negotiations fail, that would send us back to the original deadline of Dec 31, 2024 for implementation of the law.
