• Arabica coffee rose 12.2% on the week in New York, closing at US₵ 211/lb
• On the London Stock Exchange, Robusta coffee prices jumped 8.3% to USD 3,679/t
• Cepea indicator for Arabica coffee rises 10.7% to BRL 1139.89
• Cepea indicator for Robusta coffee up 8.4% to BRL 1032.47/bag
• Coffee differentials in Vietnam exceed USD 1000/t
• ICE releases note on certified coffee stocks in Europe
• CFTC/COT report shows increased appetite from funds
• Preliminary SECEX data shows 27% increase in Brazilian exports
• Vietnam's inter-crop period and lower Robusta supplies should continue to support prices
• Vietnam has received below-average rainfall in recent months
Last week, coffee futures prices advanced again and completed their third consecutive week higher, with the reduced supply of Robusta coffee being the main factor behind the gains. From the point of view of fundamentals, there were no major changes during the week, with the outlook for a larger supply of Arabica coffee. However, strong demand for Robusta and limited supply of the variety supported advances at both the London and New York terminals. The fact that the robusta futures curve is in backwardation highlights the strong demand for the product in the short term.
In New York, the expiration date with the largest number of active contracts, July/24, ended Friday (05) quoted at US₵ 211/lb, representing an increase of 2295 points (12.2%). On the London market, Robusta coffee prices rose by USD 283/t (8.3%) to USD 3679/t. On the Brazilian domestic market, while the USDBRL pair rose 1% to 5.07, the Cepea indicator for Arabica coffee rose 10.7% to BRL 1,139.89/bag. For Robusta, the indicator rose 8.4% on the week to BRL 1,032.47/bag.
Weekly intraday (most active contract) - April 1 to April 5
The scenario of limited supply in Asia can easily be seen when we analyze the level of price differentials in the country. Recently, the differentials for Grade 1 Robusta coffee in Vietnam have advanced by 24% in the last month, surpassing the level of $1000 per tonne. This means that while on the London exchange Robusta coffee was trading at around $3700 per tonne, on the Vietnamese domestic market prices exceeded $4700 per tonne. In 2024 alone, differentials in the Asian country rose by almost 180% - year-on-year, Robusta coffee differentials in Vietnam rose by more than 480%.
On Friday (05), a note released by ICE to comply with the European Union's Anti-Deforestation legislation generated a great deal of repercussions among market participants. On Friday afternoon, the note released by ICE said that all certified coffees stored in European warehouses (port of Antwerp, Barcelona and Bremen/Hamburg) that have already passed customs clearance will immediately lose their certification and cannot be used for deliveries on ICE. Therefore, as this will only affect coffees that have gone through the customs process, most or all of the certified stocks in the aforementioned warehouses will not immediately lose their certification, as they have not yet gone through customs clearance.
The latest COT/CFTC report showed a strong increase in risk appetite by funds, which increased the number of long contracts and extended their net long position. However, the scenario of an excessively long position could make coffee prices susceptible to a possible liquidation of contracts by speculative agents. According to the CFTC's supplement report, between March 26 and April 2, actively managed funds increased their long position by 9715 contracts. As a result, the net long position of these agents rose by 8775 contracts to 43059 contracts on Tuesday (02). In the same period, Arabica coffee futures advanced by 970 points (4.8%) to US₵ 197.80/lb.
Position of spec funds in coffee futures and options on the New York exchange
Source: CFTC. Design: StoneX.
In London, the COT report showed that in the same period funds increased their long position by 1174 contracts, increasing their net long position by 1183 contracts to 43872 contracts on Tuesday (02). In the same period, Robusta coffee futures prices rose by USD 198/t (5.7%) to USD 3663/t.
In the coming weeks, the coffee futures market may be susceptible to a technical price correction. In addition, prices could react in a bearish way to the release of Brazil's export data for March by Cecafé, which should take place in the next few days and point to a strong increase in the country's exports, especially for Robusta coffee. Preliminary data released by the Secretariat of Foreign Trade indicated that Brazilian coffee exports totaled 3.47 million bags in March, representing an increase of almost 750,000 bags (+27%) compared to March 2023.
However, the scenario of limited supplies of Robusta coffee in Asia will continue to support prices, mainly due to the fact that Vietnam is going through the inter-crop period, with the harvest not expected to take place until November. In addition, there are several uncertainties regarding the weather there and this is a critical point, since the country's crops are in the flowering period, a crucial stage in defining the country's production potential. In addition, the Indonesian crop will only begin to be harvested in June. In the medium term, the coming Brazilian winter, the possibility of cold waves, and the high probability of a return of La Niña from the second half of the year could have an impact on coffee prices.
With regard to the weather in Vietnam, historical data shows that rainfall has been below average in recent months due to La Niña. However, soil moisture data shows that despite falling, the water stock in the soil is still within the historical average. Therefore, an adequate return of the rainy season in the country from May onwards will be crucial to ensure proper crop development. It is worth remembering that the models of the US agency NOAA point to the end of El Niño and the return of a neutral condition in the coming months before moving towards a La Niña condition, which could be positive for weather conditions in Asia.
Rainfall history in the main Robusta coffee producing regions in Vietnam (mm)
Source: Refintiv. Design: StoneX.
Soil moisture in Vietnam's coffee-growing regions (mm)
Source: Refinitiv. Design: StoneX.
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