MILAN – The coffee futures markets rallied again in the last session of the week, with both exchanges rising up sharply to new record highs. In London, Ice Robusta’s contract for November delivery posted its fifth consecutive rise, gaining $190 (+3.7%) and closing Friday, 13 September, to settle at $5,267 (intraday of $5,281), an all-time high for the 10-T contract.
In New York, the contract for December delivery gained 1,005 points (+4%), ending the day and week at 259.45 cents, at 13-year highs.
Compared to the previous Friday, the two contracts gained 10.4% (+$497) and 9.94% (+2,345 points), respectively.
Exactly one year ago (13 September 2023), London closed at $2,479 – a price level was already considered quite high at the time, though being less than half of the current quote.
New York closed the same day at 151.95 cents: more than a dollar less than today.
Weather patterns in the two main producing countries continue to heavily affect the sentiment of the coffee futures markets.
Brazil is grappling with a prolonged drought, which is causing serious damage to the crops.
“The crops are really stressed, very poor condition, it is sad to see,” said coffee agronomist Jonas Ferraresso, who advises coffee farms in Sao Paulo and Minas Gerais state, quoted by Reuters.
He said that even if rains return in October, leading to the flowering phase, trees will hardly have energy to convert those flowers into fruits.
According to the authoritative Fundación Funcafé, it is unlikely that Brazil will be able to provide an abundant harvest next year, given the vegetative state of the trees.
Meanwhile, Safras data, updated on 10 September, indicate that Brazilian producers have already sold 54% of this year’s crop (2024/25), an increase of 14% over the previous month and in line with the average of the last 5 years (2019 to 2023).
The good progress of sales ended up raising the commercial flow above the reference of the same period last year, when the producer had sold 50% of the crop.
So far, 48% of the arabica crop has been sold, which is well below the historical average (52%), although slightly higher than last year.
The maintenance of prices close to the highs for a long period, together with doubts regarding the next Brazilian coffee crop, ends up slowing down the selling momentum and holding back the sales flow.
“The fact is that this price scenario continues to make growers quite comfortable in continuing their strategy of diluting their business flow. Unless there is a sharp decline in prices, they are unlikely to change this stance,” says the report.
As one can easily guess, considering the unprecedented export performance, sales of robusta are increasing strongly and had reached almost two-thirds (66%) of this year’s production by the beginning of September, compared to 57% last year and a 5-year average of 56%.
“The size of the crop, which was lower than initially expected, and extremely high prices, given the aggressiveness of exporters, explain the strong acceleration in sales of canephora (conillon/robusta),” the report also says. “The market continues to focus on exports, with the domestic industry restricting purchases of conillon and increasing arabica in its blend.”
In Vietnam, the toll caused by last week’s typhoon Yagi, which claimed over 230 lives and caused extensive damage, was very heavy.
The natural disaster did not affect the coffee producing areas. On the contrary, the climate continues to be favourable in the central highlands for the final development of the 2024/25 crop, local traders claim.
But the damage caused by the drought in the first half of the year remains, which would have greatly reduced the production potential of the next harvest, which will come into full swing in November.
Trading activity in Vietnam remains subdued due to the limited availability of green coffee. According to sources quoted by Reuters, the Robusta grade 2 is currently offered at a premium of $50 over coffee futures benchmark prices in London.
In Indonesia, on the island of Sumatra, premiums over the London contract are reportedly as high as $280.
