MILAN – Coffee futures markets are in search of direction after July’s flare-up. Last month, London hit new contract highs on Tuesday 9 July, while New York reached its highest level in almost two and a half years on the same day. This week, both markets stabilised and narrowed their trading ranges. Ice Robusta fell for the fifth time in a row in yesterday’s session: the main contract for September delivery closed $36 down, at $4,225,
Ice Arabica was in the red for the second consecutive session: the main contract fell 195 points to settle at 227.25 cents, a four-week low.
Over the past month, the ICE Robusta benchmark fluctuated between a low of $4,067 (1st July) and the aforementioned all-time high for the contract of $4,634 on 9 July, to close at $4,261 on 31 July.
The ICE Arabica coffee futures closed the first session of July at 224.85 cents and then fell to a monthly low of 224.20 cents on 3 July.
In parallel with London, the New York market rallied strongly in the following days (marking a 2,575 point gain in only three sessions), taking the main contract to a high of 249.95 cents (after having reached an intraday high of 252.35 cents) on 9 July. The month ended at 229.20 cents.
On the certified stocks front, the situation has partially improved, although the inventory levels are still relatively low.
In New York, stocks stood at 822,819 bags yesterday (of which 689,177 in transition), slightly below the peak of 842,434 bags reached on 25 June, the highest level in the past year and a half. About half of the stocks are Brazilian washed or semi-washed Arabica and a further 15% of these certified coffees comes from Honduras.
The Certified Robusta coffee stocks held against the London Exchange reached 6,521 lots (1,086,833 bags) on Thursday 25 July, the highest level for the past year, recovering from a record low of 1,958 lots in February. Over 90% was made of Brazilian Conillon.
The rapid harvest progress in Brazil is putting pressure on the market. According to Safras & Mercado, Brazil’s 2024/25 coffee harvest was 81% completed as of July 23, faster than 74% last year at the same time and faster than the 5-year average of 77%.
The Arabica harvest was 75% complete, faster than 65% a year ago and the 5-year average of 69%. The Robusta coffee harvest is 95% completed, faster than 89% a year ago, and the 5-year average of 93%.
Weakness in the Brazilian real is also undercutting coffee futures prices. The Brazilian currency depreciated against the US Dollar, weakening by 6.37% over the last three weeks. A weaker real encourages export selling from Brazil’s coffee producers.
Safras & Mercado recently cut its estimate for this year’s Brazilian crop by more than 4 million bags to 66 million.
Rabobank, on the other hand, is forecasting production at 67.1 million, down from a previous estimate of 69.8 million.
In the meantime, some are already looking ahead with concern to the 2025 crop, which could be affected by the drought of the past few months.
The world’s largest coffee cooperative Cooxupé, have reported that weather conditions within Brazil could impact the 2025 coffee crop should the drier weather continue. The Southeastern expansive coffee growing regions of Brazil have experienced comparatively drier weather and lower rainfall over the last 4 months of the year.
As remarked by I. & M. Smith, “this not completely abnormal as winter is historically a drier and cooler time of the year for Brazil and there are still some months ahead before the flowering is traditionally expected to come to the fore.”
“Thus, the report from Cooxupé makes reference to the onset of the new spring and summer rain season, to come in the last quarter of the year, which will be closely monitored as this will be needed to trigger the flowering for the next 2025 crop” concludes I. & M. Smith.
