W5 Coffee Update: European Coffee Stocks Plummet as Arabica Prices Rebound Amid Weather Worries

Arabica Coffee Prices Rebound After Early Slump, Driven by Weather Concerns

The New York Stock Exchange's (ICE Future US) Arabica coffee futures market experienced initial devaluation at the open but later saw prices rise significantly. Irregular rainfall in Brazil raises concerns about potential impacts on coffee production, influencing market sentiment. There are no new fundamental changes that impacted the market, but existing uncertainty regarding Brazilian weather patterns persisted. Continued volatility due to weather-related uncertainties is expected. Early price declines reversed due to ongoing concerns about Brazilian weather. Brazilian producers remain cautious due to weather uncertainties and participate in the market only when necessary to generate cash flow.

In W5, all major contract months on ICE Future United States (US) saw price increases as Mar-24: +65 points (USD 1.9465/lb), May-24: +115 points (1.9140/lb), Jul-24: +110 points (USD 1.9035/lb) and Sep-24: +85 points (USD 1.8980/lb). On the London Stock Exchange, the Conilon coffee market exhibited mixed movements as Mar-24: -USD 12 per metric ton (mt) (USD 3,324/mt), May-24: unchanged (USD 3,181/mt), July-24: +USD 14/mt (USD 3,067/mt) and Sept-24: +USD 22/mt (USD 2971/mt).

European Coffee Stocks Plummet, Raising Concerns Amidst Quiet Market Start

European coffee stocks are experiencing a significant decline, according to data from the European Coffee Federation (ECF). This trend, coupled with a quiet start to Feb-23 in the coffee markets, raises concerns about potential supply tightness and price fluctuations. Total coffee stocks in European ports fell by 37.9% YoY, from 703.4 thousand mt in Jan-23 to 437 thousand mt in Dec-23. Natural Arabica experienced the steepest YoY decline (-45.6%), followed by Robusta (-43.6%) and Washed Arabica (-22.2%).

In W5 coffee markets have witnessed a quiet start to Feb-24 following the Jan-24 rally. Arabica prices saw minimal gains, while Ice Robusta dipped below the USD 3,300 threshold for the second consecutive day. The upcoming Brazil Carnival holidays could further impact trading activity. Dry weather conditions in Brazil remain a concern for Arabica coffee production. The potential for supply tightness due to declining European stocks and uncertain weather conditions could lead to price volatility in the coming months.