MILAN – After last Friday’s consolidation, the coffee markets rebounded with a bang in the first session of the week reaching new unprecedented highs in New York and posting significant gains in London as well. Yesterday, Monday 10 February, the Ice Arabica rallied again, recording its 14th consecutive session in the black and adding 24 cents on the two nearest contracts.
March added 24.70 cents (+6.1%) closing at a new record high of 429.05 cents. May, which is now the most traded contract, in turn gained 24.40 cents (+6.2%) ending the day at 421.10 cents.
In London, the front month gained 2%, while May – now the main contract – gained 2.4% to close at $5,697. Since the beginning of the year, the benchmark in New York has appreciated by more than a third (+34.2%), and by 16% in London. Both market soared by about 70% last year.
Contributing to yesterday’s rally in the coffee markets were weather news reporting below-normal rain in Brazil. But this is not enough to justify such a price explosion.
However, the broader market context must also be taken into account. In Brazil, 85% of this year’s crop has now been sold and it will be months before the new crop of 2025/26 hits the market. Brazilian producers are reluctant to sell, especially with the Brazilian real strengthening and lowering their earnings in local currency terms.
The supply chain is under severe pressure and is facing serious logistical and financial difficulties.
World stocks remain very low. According to analysts they could fall to their second lowest level in 65 years if Brazil doesn’t deliver a good crop in 2025.
According to Bloomberg analyst Javier Blas, “We have already spent four consecutive years consuming more coffee than we were producing – between 15 and 20 million bags.
In addition, the sword of Damocles of US tariffs on Colombian coffee hangs over us, although this seems to have been averted for the time being.
“Colombia is the world’s third largest coffee producer and just the threat of tariffs is enough to scare the market,” he added.
All these factors suggest, says Blas, that retail prices in the US market will rise by 20-25% in the next few month.
Dealers say, however, the rally in arabica has to some extent become self-perpetuating and out of sync with fundamentals, as Reuters points out.
Meanwhile ICE Arabica speculators cut their net long position by 3,130 contracts to 50,333 contracts in the week to February 4. Certified stocks recovered yesterday to 872,991 bags, with over 130,000 more bags pending certification.
