MILAN – Coffee futures rallied again on Tuesday, with Ice Arabica surging to new nominal highs and London once again close to its contract records. Yesterday, both market were marked by a mid-afternoon surge followed by a sharp retracement, which did not prevent a positive close. In New York, the contract for March delivery opened strongly up and rose to an intraday peak of 348.35 cents, an all-time high dating back to 1972.
Subsequent profit taking brought it back to more reasonable levels, closing at 334.15 cents, still up 405 points from the previous da.
In London, the March contract reached an intraday high of $5,510 during trading, then gave up most of its gains to settle at $5,232, up a further $32.
The markets were fuelled by the publication of a new, very pessimistic estimate of Brazil’s next crop by Volcafe, whose highlights were published by Bloomberg.
The eminent Swiss trader – at the end of a crop tour of 1,850 sample farms – had to acknowledge “the stark impact” of the long dry spell that lasted from April to September.
Brazil “had the potential of moving the global supply and demand equilibrium back into a much-needed surplus,” Volcafe said. “However, the results of our crop tour indicate significantly high levels of blossom failure.”
As a result, Volcafe has reduced its estimate for the 2025/26 Arabica crop by 11 million bags, to 34.4 million bags. This will result in an unprecedented fifth consecutive year of global supply deficit, of as much as 8.5 million bags, in 2025/26.
“The situation of continuous deficits prevalent since 2021 is largely driven by the inability of Brazil to produce a healthy ‘on-cycle’ arabica crop back to above 50 million bags, primarily due to climate change,” says Volcafe, who has also lowered its estimate for the next Robusta crop by 1.5 million bags to 24 million..
On the other hand, global Robusta production in the upcoming season is seen at a 1.2 million-bag surplus, following four years of deficits.
Brazil’s smaller Arabica crop will have a major impact on the market outlook, says Volcafe. Certified stocks are unlikely to reach a threshold that would contribute to the recovery of the contango.
Tightness in the Arabica market has also been driven by an increased demand following a shortage of Robusta beans earlier this year, which could push inventories to “untenable levels” by the second quarter of 2025, Volcafe stated.
This in turn could push the market back towards Robusta in the medium term, helping to support prices of the cheaper variety.
According to I. & M. Smith, the weather in Brazil is reported to be conducive thus far in December, with this month bringing along with it, adequate rainfall across the vast coffee growing areas. Further rain is forecast to fall across most of the coffee belt regions for the remainder of the month.
