MILAN – Arabica and Robusta coffee futures set new record highs last week drive by fundamentals and speculation. In New York, the Ice Arabica May contract soared to a new closing high of 425.10 cents on Thursday 13th February. Heavy profit-taking on Friday the 14th then saw the contract retreat by 4.3%. The week ended at 407.40 cents, up 2.7% on the previous Friday.
In London, the May contract closed 2.8% higher on Thursday at a new all-time high of $5,821.
The two following sessions ended in negative territory, though with smaller losses than New York, and the week ended at $5,726, $162 above the previous Friday..
The authoritative Brazilian analyst Safras & Mercado wrote in a commentary that it is as if the market had entered a “kind of bullish autopilot, seeking to overcome one bullish challenge after another.”
“Coffee in New York is technically stretched, vulnerable to corrections given the growing signs of an overbought market,” the commentary goes on saying.
“Despite this, it is increasingly difficult to find someone willing to bet against the rise. Funds, in fact, continue to increase their net long position in coffee on the commodities exchange.
Therefore, the market dynamics continue to be driven by buyers, which reinforces the escalation of prices. But for how long? Some claim that even the market is testing its buying strength, seeking its financial limit.
This involves the consumer’s ability to pay and the credit capacity of traders to sustain positions, reinforcing the idea that the current coffee market has lost touch with fundamentals and is increasingly driven by financial challenges.”
Last week’s rally sent domestic prices in Vietnam skyrocketing again.
According to local sources, prices per kilogram reached 131,000 dong ($5.1/kg) in the Central Highlands on Wednesday, back above the psychological threshold of 130,000 dong.
In spite of this, Vietnamese producers continue to sell cautiously believing that prices can still rise.
Experts believe that prices will remain at very high levels until at least July, but still urge producers not to push too hard, at the risk of over-exposing themselves to financial risks.
The risk of counterfeiting in the coffee supply chain is also growing in Vietnam. In late January, authorities in Gia Lai uncovered three facilities in Pleiku mixing unidentified chemicals into ground coffee, reports Vietnam+. Similarly, Brazil’s Coffee Roasters Association (ABIC) recently issued a warning about adulterated coffee made from husks, leaves and other non-coffee substitutes.
