MILAN – Another week of all-time highs in the coffee futures markets, with both exchanges reaching unprecedented levels between Wednesday and Thursday. In New York, the main contract (March) closed at a 47-year high of 323.05 cents on Wednesday 27th November, on the eve of the Thanksgiving Festivity.
In London, the front month (January) surged to $5,565 on Thursday the 29th, setting a new record high for the 10-TON contract.
Friday, 29th November, saw a partial sell-off in both coffee futures markets: profit taking was accelerated after the Brazilian real sank to a record low against the dollar. .
Ice Arabica and Ice Robusta lost 1.6% and 2.8% respectively, closing at 318.05 cents and 5,409 cents, but were still 5.3% and 8.5% higher than the previous Friday.
Pushing coffee towards unprecedented recent levels was an explosive mix of constructive fundamentals, financial and logistical problems, not to mention the still unresolved knot of the postponement of the EUDR regulation (the decisive trilogue is scheduled for tomorrow) and the tariff offensive announced by US President Donald Trump even before his official inauguration at the White House.
On the campaign trail, Trump promised universal tariffs on all imported goods. After the election he adjusted his focus by restricting it – for the time being – to Canada, Mexico and China.
Should Trump’s tariffs apply to countries like Brazil, Colombia, and Vietnam, that would add an average $0.23 to the price of one pound of coffee, according to a calculation by a US think tank.
Meanwhile, the rising cost of green is putting some traders in serious financial trouble. This is the case of two Brazilian companies – Atlanta and Cafebras – which last week asked for debt restructuring, citing problems caused by poor crops failures and a high volume of rollovers and defaults.
Insiders are convinced that similar cases could be repeated with other traders, creating a domino effect on the markets.
“This kind of situation feeds off itself and cascades across the market. In my view we’re going to go to $3.50 per lb (in New York) or very close to it, and soon,” said the trader interviewed by Reuters.
