Coffee futures have broken out of the range Sucafina expected them to hold. The most active December contract rose 20 cents from Tuesday, September 22, to close at 292.55 US cents a pound on Monday, October 5. Two weeks ago Sucafina expected prices to edge lower toward the bottom of the 270 to 280 range. Instead, the market rallied at the end of September and moved clear of the 280 level by month end.
Some short covering took place, and short-term momentum indicators led to net speculative buying on the week. Sucafina does not see either as the main driver. The rally seems to be driven by tempered expectations for the arrival of ICE-certified stocks, the coffee sent to the exchange for grading. As soon as pending gradings slowed, the market began to rise.
A question of enough coffee for December
Whether enough coffee will come forward to be certified for the December contract is now the concern working its way through the market, and it was the main topic of discussion at this year’s SCTA forum in Montreux, Switzerland. The amount of new coffee waiting to be graded stands just above 12,000 bags. Brazil’s official export figures for September are likely to come out on Friday after the market closes, and traders are watching them closely.
Discussion has also turned to what the coffee heading into Europe is for: refilling pipelines for nearby roasters, or arriving ahead of the EUDR taking effect at the end of December. Sucafina sees a low possibility of shipments afloat being rerouted to meet roaster needs.
Possibility and reality are still two different things, and the market is waiting to be assured that coffee will actually refill the exchange stock pipeline. Sucafina expects prices to edge higher this week to test $3.10 a pound, then wait for confirmation from either new pending gradings or better-than-expected September exports from Brazil.
