Coffee futures traded in a 370-390 range this week as record December contract delivery inversion provided bullish support, largely offsetting the impact of US tariff relief on Brazilian coffee imports.
The coffee futures basis the most active March contract fell 0.05 cents from Monday to Monday, ending at 376.55 US cents/lb. The December contract went into delivery with 4 participants taking delivery at a record level of inversion this century (+31 at the time of writing).
This means traders are willing to pay a roughly $21 million premium to take coffee in the nearby contract, in-store US and Europe, versus buying coffee and shipping it to the destination against the March contract. This places a significant bullish undertone to the market.
The most important announcement so far in Q4 was the alleviation of US tariffs on Brazilian coffee. The announcement of the 40% tariff being lifted came on Thursday and saw the market sell off 24 cents to $3.51 in the early trading hours on Friday.
However, a large wave of roaster buying kept the market buoyant enough for the spread action to mount a massive reversal on the day. The market did enough to keep the technical chart patterns intact, with expectations for a 370-390 range maintained.
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