MILAN – The past week has been a turbulent one for the coffee futures markets, with reports of localised frosts in the Brazilian coffee belt in in the early hours of Sunday 11 August. Of concern is not only the frost that occurred earlier in the week, but also the ongoing drought that is causing severe water stress to the crop.
The drought could lead to premature flowering on coffee trees, reducing yields for the 2024/25 coffee crop. Frost recorded in limited areas of São Paulo (Mogiana), Cerrado Mineiro and even southern Minas Gerais triggered sharp rises on both exchanges on Monday 12 August.
It was later ascertained that the frosts were minor and would not have a significant impact on production, leading to sharp falls on Tuesday. However, on Wednesday the 13th, prices began to rise again, helped by the strength of the Brazilian currency.
In the space of three days, New York‘s December contract gained 6.6%, closing on Friday the 16th at 244.10 cents, its highest level since the second ten days of July. Similarly, London’s coffee futures for November delivery appreciated by 6.3% to end the week at $4,452, not far from the highs seen in the first ten days of July.
This trend is justified by concerns about frost, but also about the effects of the cold snap, which will only be fully assessed when the bloom sets in.
As mentioned above, the drought, which has now lasted for four months, is also worrying the markets. Such a long period without rain could indeed affect the production potential of the next harvest.
Meanwhile, Safras & Mercado reports that the 2024/25 crop is now 96% complete. According to S&M analyst Gil Barabach, the market remains firm, but potentially subject to adjustments driven by new data on fundamentals.
“Anticipation is growing for the next harvest in Brazil,” Barabach explains in an analysis, ‘the first conilon blooms are being recorded in Espírito Santo and we await the return of rain in Minas Gerais and the flowering of Arabicas in September and October.
In other news, the Ugandan Coffee Development Authority UCDA have reported that their country’s coffee exports for the month of July were 170,320 bags or 26.15% higher than the same month last year, at a total of 821,593 bags.
Uganda Robusta exports registered a 22.16% increase when compared to the same month last year, to total 722,444 bags and Arabica exports registered a comparative 17.92% decrease when compared to the same month last year to total 49,149 bags exported in July 2024.
