MILAN — Coffee futures rallied in the last session of the week. On Friday, 23 August, the Ice Robusta bounced back, after Thursday’s fall, which had broken a previous streak of six consecutive upward sessions on both markets. The contract for November delivery gained $141 (+3.1%) to close at a new contract high of $4,715.
The front-month (September), which continues to generate significant trading volumes, crossed the $5,000 mark to close at a stellar $5,128.
The gains for coffee futures in New York were more contained. Ice Arabica contract for December delivery added 440 points to end the week at $247.30, below the highs of Wednesday, 21 August, when the benchmark settled at 249.25 cents, not far from the 249.95 cents reached on 9 July, the highest point for the main contract in almost two and a half years.
The fundamentals picture in the coffee markets remains unchanged, with climate problems in Brazil and Vietnam holding sway, exacerbated by the recent frost in the Brazilian coffee belt.
Analyst BMI said in a note that Vietnamese exports had fallen due to tight supplies in the world’s largest Robusta producer, while the prospects for the next harvest had been dented by below-average rainfall. A Reuters poll indicated prices could rise further towards year-end.
According to Safras & Mercado’s coffee analyst Lessandro Carvalho, the market is seeking a slowdown, trying to consolidate the range between 230 and 250 cents while awaiting a financial definition and clearer signals about the next Brazilian crop.
“Coffee supply remains tight, reflecting the current reduction in Robusta production and indicating that the next crop in Vietnam will be limited, as it was previously. In Brazil, a lower-than-expected output intensifies the supply shortage, favouring an increase in the global balance of coffee prices,” writes Carvalho in an analysis.
“However – continues Carvalho – Robusta has already reached its highest level in 16 years, and Arabica is also sharply valued, reflecting this scenario of tight supply. On the other hand, demand, which was on the rise, has begun to slow down.
Low stocks have already been replenished and, in the European Union, purchases exceeded what was necessary, expanding buffer reserves against possible impacts of the new EUDR (European Union Deforestation-Free Regulation).
This situation explains why coffee continues to be valued but is having difficulty rising above 250 cents per pound for Arabica on ICE US.”
