Coffee futures came off the boil this week, with the most active September contract falling 19.9 cents from Monday’s historic rally to settle at $3.30/lb. According to Sucafina, the market tested toward $3.50 again before pulling back hard on Tuesday to a low of $3.15, then made another run on Thursday after ICE raised initial margin requirements, adding financial stress to an already volatile market. That rally failed to breach $3.50, and prices settled into a broader range around $3.30.
What happens next hinges on Brazil
With peak harvest of the 26/27 crop approaching, farmers have been handed much higher prices to commercialise a near-record Arabica crop. Differentials for Brazilian coffee have fallen, and Sucafina flags the key question as whether any of that coffee heads to the exchange as certified stock.
A rebuild of certified inventory would calm a market that sees destination stocks as precariously low. But certified stocks act as a buyer of last resort, and cheap coffee can find a home with a roaster first. Until roasters’ nearby needs are covered, the market stays exposed to price shocks that force weak shorts out and push prices higher.
Another test of $3.50 ahead
Sucafina expects another test of the $3.50 highs in the week ahead. Whether Brazil’s selling caps it is the question.
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