
Daily Coffee Report 8/11/26
Daily coffee report

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By: Alexis Rubinstein, Managing Editor - Coffee Network
CoffeeNetwork (New York) - After frost damage to Brazil’s crop in winter 2021, earlier this year the market started to respond to concerns over a lack of supply, sending the forward curve into backwardation, when spot prices became higher than futures prices. The result…it was not favorable to carry over stocks. This, in addition to the high interest rate, made the carryover even more expensive, making it financially unattractive to buy new coffee.
As the crop progressed, and the shortage of coffee that was once feared did not materialize, we began to observe the forward curve start to normalize, with a gradual increasing towards contango, or the opposite of the backwardation that was observed just months earlier. (The September position is still inverted, but this expires on September 23rd). Now, futures prices were higher than spot prices, and, in general, investors are willing to pay more for coffee that will be delivered in the future. The premium, or the difference between the spot and futures prices, includes the cost of carry, or the amount paid for storage, insurance, or depreciation due to spoiling or rotting of green coffee.
According to Continental Terminals, in NY the warehouse charges are $1.05/bag per month, or about $0.007/lb per month, but this is only one piece of the carry cost calculation. Insurance and the interest rate also need to be factored in. Coffee importer, Intercontinental Trading told us that the “all in” cost can be anywhere between $0.05 and $0.07/lb per month, with an interest rate ranging from 12 to 13.5% for commercial properties. Now, the Dec-March spread trading at -1.10 cents which is obviously below the cost of carry.

What caused this?
Contango in the coffee market historically occurs when the supply of the commodity is normal, which results in the upward-sloping forward curve.
Generally speaking, various factors could increase the contango. The most common are inflation, political concerns, and adverse weather. As we know, coffee is extremely vulnerable to inflation on the demand side and weather for supply. StoneX and CoffeeNetwork have reported that data from imports/exports and lower sales volumes from many of the major global coffee companies implies lower consumption. This, coupled with expectations of a larger Brazilian crop (StoneX has forecast that production will rise 4.2% year on year) meant a supply glut, being very bearish for coffee, and see prices fall. With that in mind, the market expects, in the longer term, a recovery in consumption, and is taking into account any vulnerability of adverse weather to future crops. Therefore, coffee futures prices are expected to be higher in the longer term versus now.
What’s next?
We believe that the contango condition will increase as the new Brazilian crop from 2023 begins to flow fresh coffee in to the market. This means that we will likely see traders certify more coffee and roll positions ahead of first notice day. They will continue to certify coffee and do the switches for as long as it pays the carry cost.
We observed a drop in the spreads last October, and certified stocks fell below 400,000 bags. Then, in November, the market returned to contango, which saw the addition of over 85,000 bags of certified stocks and a massive influx of coffee “pending grading.”

A market in contango also sees gradual decreases in price to meet the spot price at expiration. November 10th is the December contract options expiry.
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Daily coffee report


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.


Daily coffee report

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