MILAN – Another day of consolidation for coffee futures , with very slight downward corrections in both markets. In New York, the benchmark dropped 45 points to close yesterday at 243.15 cents. In London, the main contract for September delivery lost $2, ending the session at $4,570.
It is interesting to note that all subsequent expiries from the November contract onward, closed on the positive side, with gains increasing as we move forward on the time line.
According to Hedgepoint Global Markets analyst Laleska Moda, last week’s rally on the London stock exchange was primarily attributable to the disappointing performance of Vietnamese exports, which fell 11.5% in June to a 13-year low.
The lower volumes shipped have contributed to the perception of low stocks, which is all the more worrying given that the 2024/25 harvest will not start until late October/early November, with a larger volume of Vietnamese beans expected to reach the market only at the end of 2024.
Added to this are concerns about the effects of the worst drought in nearly a decade on the 2024/25 harvest.
Lower availability has put a brake on sales and looks set to reduce shipments in the coming months as well. Our expectation,’ the analyst continues, ’is that exports will be around 26 million bags by the end of 2023/24.
Arabica coffee futures were also strongly higher, with the main contract testing the $2.50 level last week.
The lower Robusta availability is boosting Arabica consumption, while the 2024/25 crop in Brazil continues to cause concern due to the smaller bean size and lower yields.
“Although there has been an improvement in bean size in some regions, production may still be lower than initially forecast,” Moda pointed out.
A downward correction, even a small one, of the initial forecast could lead to an even larger global deficit in 2024/25. Our models are already suggesting a slight deficit for the coming year, says Moda.
Part of the market is already convinced that both the Arabica and Robusta crop in Brazil will be lower than initially estimated.
Nevertheless, Brazilian export figures remain at record levels. With the country’s harvest nearing its end and rising prices, Brazil’s exports look set to remain strong in the coming months, Moda concludes.
