September contract jumps as fresh interest returns
Coffee futures rallied hard this week, according to trader Sucafina, with the most active September contract up 17.3 cents from Tuesday to Tuesday to close at 339.4 US cents a pound. The market had been stuck in an illiquid range for weeks, but Monday and Tuesday brought fresh interest, particularly in the spread between the September and December contracts.
Exchange stocks, not demand, are driving the move
The trigger is exchange stock, not demand. ICE certified coffee stocks are drawing down quickly and have now dropped below the closely watched 300,000 bag threshold. Not enough new crop Brazilian arabica is reaching the exchange to replace what is leaving it. Brazilian farmers, well capitalised after a 75 cent rally in their favour during peak harvest, are in no hurry to sell unless prices push to fresh highs. Other origins are not filling the gap either: Colombia is still working through existing export commitments or sitting between crops, leaving Brazil, alongside robusta, as effectively the only active supplier to the market right now. That concentration is what makes the September contract so exposed to further upside.
Exchange eases margin requirements to relieve pressure
The ICE exchange has already eased margin requirements twice in the past two weeks, cutting the initial margin to 15,000 and then 10,000, a move that took some of the financial pressure off the market.
Outlook
Sucafina’s own view is that prices could keep climbing this week as traders approach the roll from the September to the December contract, with the market looking to break above 350 cents and toward 360 by the end of the week.
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