July Arabica coffee traded on Monday closed down 4.2 cents/pound and Robusta coffee closed up $53 at $4,133/ton.
The recovery of Arabica coffee supply has created pressure to liquidate buying positions on the futures exchange on the first day of the week. While the supply of Robusta coffee, especially from Vietnam, at this time continues to be tight.
Brazil’s Minas Gerais region received 7.6 millimeters of rain over the past week, or 58% of the historical average, meteorological agency Somar Meteorologia reported Monday. While the weather situation in Vietnam is still very dry, the current increase in coffee prices is not only due to the impact of previous crop failures from producing countries but also the prolonged drought in Vietnam. South has made it clear to farmers that it will have a serious impact on the upcoming 2024/2025 crop.
The report on positions (COT) of participants in the New York coffee market shows that non-commercial speculative participants increased their net long positions by 10.05% of the figure as of January 16. April 2024, after this date this component is registered to hold a buying position of 53,433 kilograms.
The position report from the London Robusta coffee market alone for fund managers reduced their net long position by 9.83% as of Tuesday, April 16, 2024 after the cut-off date. The fund manager registered a new net long position of 35,536 lots.
Inventories of certified graded Arabica coffee held on the New York market were said to have increased by 7,980 bags on Friday, to 643,090 bags.
The spread between the London and New York markets narrowed last Friday, when the figure in cents between the two markets fell to 46.78 Usc/Lb. This gap has narrowed compared to the previous 3 sessions due to Arabica coffee prices falling while prices on the London market continue to increase.
The Brazilian Real is still hovering at 5.207 for 1 USD without further devaluation at the beginning of the week, however the exchange value between this currency pair is no longer a strong selling motivation from Brazilian Farmers because it seems that They are also aware that current weather problems will have a strong impact on the next crop. The decline in coffee prices on the two world trading markets, if any at this time, is largely due to futures positions.
The climate scenario in Southeast Asia continues to be a key concern for the market. Although humidity is forecast to increase in Vietnam over the next 8 to 14 days, the expected volumes are still not enough to allay producer concerns. In addition to low rainfall, this rainfall is unevenly distributed, most concentrated in the northern region of the country.
This panorama is especially worrying for bloom growth, even in irrigated areas. The necessary climatic stabilization will only be achieved with greater rainfall, sufficient to sustain the continued growth of the garden after flowering.
In Indonesia, even with reduced rainfall, concerns persist. Excess moisture can slow fruit ripening and prevent the start of harvest. In the context of the scarce supply of Robusta coffee, any delay at this time increases concerns and makes it easier for prices to spike.
A cold front has just passed through the southern and southeastern regions of Brazil, forecast to bring rain to coffee growing areas in the next 7 days. Humidity will decrease in the following weeks in the southeast of the country, where Brazil’s main coffee plantations are concentrated, facilitating progress in harvesting and drying.
Although the first cold wave of the year will cause temperatures to drop, it is not expected to be severe. There is no risk of frost for the coffee growing area at this time. The cold is mainly concentrated in the southern states of the country. As it moves towards São Paulo and south of Minas, it becomes more oceanic, increasing humidity and reducing the likelihood of frost.
The US National Oceanic and Atmospheric Administration (NOAA) has updated its El Niño and La Niña forecasts, tracking changes in the ocean and atmosphere. The March report shows that El Niño intensity will gradually decrease in April, with the climate trend returning to neutral.
Forecasts show that La Niña will form from June onwards, with greater intensity in the second half of 2024. Therefore, this year’s winter in Brazil is expected to be drier and colder than last year. The frequency of polar air masses entering the coffee region will increase, increasing the risk of frost.
> Challenges when coffee prices increase
Kinh Vu (giacaphe.com)
