MILAN – Coffee futures rallied wildly yesterday with unbridled gains on both terminals. In London, the September contract gained $286 (+6.58%) to close at $4,634, the contract’s new all-time high. New York coffee futures also skyrocketed: the main contract (September) gained 1,555 points (+6.63%) to close at 249.95 cents, having touched an intraday of 252.35 cents, its highest level in almost two and a half years.
Both coffee futures markets continue to be affected by market tensions and unfavourable weather conditions in Vietnam and Brazil, where estimates for the next crop of both Arabica and Robusta are expected to be lowered.
The latest Commitment of Traders report from the ICE Arabica has seen the Non-Commercial Speculative sector decrease their net long position by 6.06% within the market over the week of trade leading to Tuesday 2nd July 2024 to register a new long position of 44,821 lots, which is the equivalent of 12,706,555 bags, according to data reported by I. & M. Smith.
This net long position has most likely been little changed following the period of mixed but overall firmer trade that has since followed, says the same source.
In Vietnam, the Customs Authority further revised down its figures for June coffee export to 1,170,033 bags, or an 11.5% decrease over the same month last year.
This brings the total for the first 9 months of the 2023/24 coffee year (October-June) to 20,941,499 bags, or 6.66% less than the same period last year.
These figures reflect the low coffee availability due to this year’s smaller crop and depleted stocks.
Vietnamese producers are well capitalised and reluctant to sell, given the firm market structure in the London market. Cecafé will publish Brazilian export figures for June today.
Yesterday, the media focused on comments made by Giuseppe Lavazza, Chairman of the Lavazza Group, at an event on the sidelines of the Wimbledon tennis tournament.
The price of coffee is set to remain “very high” and is unlikely to drop until the middle of next year amid intense pressure on supply chains, he said.
“We have never seen such a spike in price as the trend right now,” Lavazza added. He admitted that he had been wrong to predict last year that prices would begin to fall this year.
“The coffee supply chain is dramatically under pressure,” he said in comments reported by the Financial Times. “Coffee prices are not going down … [they’re] going to stay very high.”
Worsening harvest conditions in major production areas of Brazil, Vietnam and Colombia, and shipping disruption caused by the Middle East conflict have exacerbated inflationary pressures, helping prices reach 15-year highs, he said.
Lavazza added that new EU Deforestation Regulation (EUDR barring imports of coffee and six other commodities that have been grown in deforested areas from being sold in the bloc will push prices even higher.
“In the coffee business, only 20 per cent of the farmers are ready to meet the regulation,” said Lavazza.
Recent European elections, which have pushed the make-up of the EU parliament in Brussels to the right, create the possibility of amending the legislation, according to Lavazza. Otherwise, about 8mn coffee farmers “will be cut off from the chance of selling coffee to you”.
US Trade Officials along with members of the ICP International Coffee Partners have jointly called on the European Union to delay the implementation of the EUDR.
