Daily Coffee Report 8/11/26
Daily coffee report
StoneX Coffee Team
- Coffee
Updated: What’s Going on with Certified Stocks? The Black, White and Gray Areas of ICE Coffee Inventories
By: Alexis Rubinstein, Managing Editor - Coffee Network
Updated: What’s Going on with Certified Stocks? The Black, White and Gray Areas of ICE Coffee Inventories CoffeeNetwork (New York) – Certified stock inventories have been impactful for the direction of the Arabica coffee market, last seen totaling 832,072 bags, down nearly 17% year on year. While certified stocks remain lower in this respect, they have been steadily climbing from the more than 20-year lows reached in November. But the major question in the market has been, is the replenishment of stocks entering ICE exchange warehouses new coffee or old?
Since it is only profitable to sell certified coffee on the exchange when differentials are low, it is unlikely that new coffees are being certified with the intention to deliver. It is possible that fresh coffees are being certified for financing reasons (to serve as collateral), but more likely the influx of certified coffee is primarily cheaper, older coffee that is “good enough” to pass certification.
With the rumor mill swirling about a change in regulations that now allowed coffee to be decertified and recertified, to essentially wipe away aging penalties, CoffeeNetwork conducted an interview with Tim Barry with the InterContinental Exchange to set the record straight. Barry told CoffeeNetwork that “the rules have never had a bar on an owner submitted for grading- any product based on its age, or whether it has previously been certified.” There was, however, a recent rule amendment which accelerated the rate at which the aging penalty accrues, which, coupled with an inverted market, has incentivized this recertifying process.
“The reason we had an inversion is the dramatic drawdown of certs,” Ryan Delany, Chief Analyst at Coffee Trading Academy, LLC told CoffeeNetwork. ““With frost, high prices, transportation problems, record freight costs, etc, there was incentive to consume certified inventory.” Delany explains that the drawdown in certified inventory to 22 year lows skyrocketed inversion, telling the world we need more coffee, and sparking the need to replenish that inventory.”
Tim Barry maintains that there are still risks involved with putting coffee up for recertification. “There are costs involved,” he says. “Anyone submitting coffee for certification has to pay to have coffee sampled and graded, and they run the risk that coffee won’t pass grading.”
“Decertification is not only allowed, but encouraged,” Delany explains. “The whole point of certified inventory is to keep the price of the futures market “real”, that is, the price of a future should reflect the price of real consumable, green coffee. Aging penalties encourage consumers to consume older stocks so that the remaining stocks consist of relatively fresh coffee, this ensures that futures prices reflect the price of consumable coffee, not ancient, mummified coffee stocks.”
The real controversy, therefore, is surrounding the recertification process, with the incentive of the holder of the product to save money. Delany explains that it is not necessarily the same blocks of coffee being decertified and recertified to wipe away the aging penalties. “My understanding is that what they are doing is searching within that existing stock for coffee that tastes fresh and resubmitting it,” he says, as it must still pass grading. Additionally, older coffee could potentially be decertified and blended with fresh coffee, and then resubmitted for certification. Based on certified stock reports from the Intercontinental Exchange, recent submissions had a 30-60% pass rate on coffee.
While this is all relatively black and white, there is speculation of some “gray areas” as well. In 2010, the exchange approved Brazil as a deliverable origin, and semi-washed Brazilian coffee as deliverable quality, effective for March 2013 delivery. Since small amounts of natural coffee could be undetected in a semi-washed Brazil, it is possible that coffee is being blended with naturals and still passing grading. When naturals are trading at a discount toto futures, this could potentially make new coffees cheap enough to tender.
With the market being in a state of crisis with record low certified stocks, it’s possible that trade houses could have taken the “any means necessary” approach to replenishing inventory.
Only when differentials come back down will we see more straight forward certifying of new coffee. With the October crops and Brazil’s 2022-2023 crop over, we are now in a tight period before Brazil’s new crop is harvested. Already, crop expectations are all over the place, ranging from 55 to 76 million bags. Last week, StoneX pegged production at 62.3 million bags. If the higher end is correct, diffs could come crashing down and all of those incentives to certify Brazilian coffee will return. Pending stocks will start to pick up, calendar spreads come back into carry. If the opposite is correct, diffs are staying high, but with fresh coffee available, we could start to some normalization.
“Pending stocks have dried up for the moment,” Delany said, “I think we have hit the peak of coffee to be certified until differentials come down. We will likely see differentials come off as we get into the 23/24 Brazil crop and then the October crops, but it seems unlikely that diffs will come off sufficiently to incentivize large scale certification. However, the market is inverted and stocks are low, so if there’s coffee around that’s cheap enough to certify, now would be the time to do it.”
Alexis Rubinstein
- Coffee
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August 11 – It was generally a quiet night for the markets until early this morning when a headline hit that Iran and Oman were close to reaching a deal. Stock futures rallied, while the dollar index followed Treasury yields lower, along with active selling in the energy- and food-based commodities. The headline had limited impact though in a world that has become skeptical of promises of peace. Stock futures remain steady to firmer at this hour, while the VIX trades near 16 – just above 2026 lows. The dollar index is trading near 99.8 this morning, after recovering from its early morning selloff over the following hour of trade. Yields on 10-year Treasuries are trading near 4.69%, while yields on 2-year Treasuries trade near 4.22%. WTI crude oil is trading near $82 per barrel at this hour, while Brent trades near $88. The grain and oilseed markets are mostly weaker, after failing to recover from this morning’s early selloff that started in the crude oil market.
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Daily Coffee Report 8/10/26
Daily coffee report
StoneX Coffee Team
- Coffee
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