MILAN – Coffee futures prices collapsed in the first session of December. After reaching record levels during the month of November, both markets suffered heavy losses yesterday, Monday 2 December, caused by fund profit-taking. In New York, the March contract lost 22 cents (-7%) to end the day at 296.05 cents. In London, the contract for January delivery gave up more than 10.6% (-$575) to close at $4,834.
Last week, New York reached its highest nominal levels since the second half of the 1970s, at the time of the Black Frost, the worst in Brazilian history.
London coffee futures soared to over $5,700 (intraday of $5,730, 29 November), the all-time high of the 10-Ton contract.
The strong liquidations took place in an overbought market. In the week to 26 November, the net long position of speculators marked a further 10.3% increase at the Ice Robusta to new net long position of 24,421 lots
In New York, the latest COT report has seen the Non-Commercial Speculative sector decrease their net long position by 2.50% to 39,726 lots.
The move in both markets was amplified by the triggering of automatic sell orders, which in turn pushed the price down and continued to trigger other algorithms as prices fell.
Also putting further pressure on prices was the continuing weakness of the Brazilian real, on the backdrop of the difficult situation of Brazil’s public finances and high inflation.
Coffee is one of the best performing commodities this year. From the first session of 2024 to last week’s highs, Arabica and Robusta futures gained 71.5% and 104.3% respectively. Among tropical products, only cocoa did better, rising 112%.
Meanwhile, the situation on the fundamentals front remains very tense. In Brazil, arabica crops are showing strong symptoms of vegetative stress and next year’s production is expected to decline significantly, despite the good flowering.
In recent months, we have also seen significant downward revisions to this year’s production estimates for Brazil. Usda, for example, has revised its 2024/25 figures down by 3.5 million bags from its June forecast. Conab will release its fourth official estimate for this year only on 21 January, one month later than usual.
Brazil has exported huge volumes of the commodity in the past months and producers are now reluctant to sell the coffee left in the warehouses as they believe prices will remain high.
Then there is the knot of the Eudr. Parliament and Council negotiators will try today, Tuesday 3 December, to reach an agreement on the postponement of the entry into force of the deforestation law by one year. If they find an agreement, the amended text will go to the plenary in the middle of the month.
