Daily Coffee Report 8/13/26
Daily coffee report
StoneX Coffee Team
- Coffee
What’s Going on with Certified Stocks? The Black, White and Gray Areas of ICE Coffee Inventories
By: Alexis Rubinstein, Managing Editor - Coffee Network
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 financially beneficial to certify coffee to the exchange when differentials are low, as was observed in 2020 when differentials (especially in Brazil) collapsed, it can be inferred that the influx of certified coffee is not new coffee at all.
Source: StoneX
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 buy certified inventory.” Delany explains that the consumed cert inventory 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. “Because of aging and the whole point of certified inventory is to keep the price of the futures market real, so futures reflect the actual price of coffee, not some arbitrary financial price.”
The real controversy, therefore, is surrounding the recertification process, with the incentive of the holder of the product to save money. Delany explains that in most cases, it is not the same lot 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, old coffee is being decertified, blended with fresh coffee, and recertified. Based on certified stock reports from the Intercontinental Exchange, there is about 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, effective for March 2013 delivery. The amendment stated that coffee should be “free from all unwashed and aged flavors in the cup,” essentially allowing for semi-washed coffee to be certified. Since the wording of the amendment focuses on the flavors, and not the actual composition of the coffee, it is possible that coffee is being blended with naturals and passing grading.
With the market being in a state of crisis with record low certified stocks, many trade houses could have taken the “any means necessary” approach to replenishing inventory.
“But this could be the new coffee market,” Delany says. “We have evolved away from being a washed contract and the market has evolved away from being a washed market.” With Brazil and Ethiopia, 50% of the world’s coffee is naturals.
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,” Delany said, “I think we have hit the peak of coffee to be certified but I don’t see differentials coming down too much any time soon, so we won’t see new pending certs. If there’s coffee to be decertified and recertified, now would be the time to do it.”
Alexis Rubinstein
- Coffee
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Daily Coffee Report 8/12/26
Daily coffee report
StoneX Coffee Team
- Coffee
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