FEB 19 (SpillingTheBeans)–Arabica coffee futures surged ahead in a stunning rally on Wednesday, with the March contract closing up 19.10 cents per pound at $1.7175 per pound on the ICE futures exchange in New York, and more active May futures settling up 17.75 cents at $1.7260/lb. Growing concerns over the extend of severe damage to the next 2014-15 crop in the world’s largest grower Brazil was starting to create “real panic” in the market, traders said and this, coupled with “extremely slow exports” out of Vietnam, the second largest producing country in the world, left roasters and buyers with little confidence of where to get their supply from in the years ahead. “Right now it’s all Brazil and people are really starting to be hit by panic, but this is made worse by the continuing lack of shipments from Vietnam, and with exports now five months into the new cycle it raises the question whether Vietnam will be able to provide any buffer at all,” said one trader in the U.S. physicals market. The worries over world supply in 2014 from Brazil follows an extensive period of dryness which already is reported to have caused the worst drought in as much as 70 years. Making matters worse is that the drought comes following a period of excessive rains in December in Brazil’s main Arabica growing belt of Southern Minas that even before the rally was reported to have result in damage of between 30 and 40 percent of the flowering for the next crop, for which harvesting starts in April. “The rally started because most of the big players already had made dramatic cuts to their forecasts for Brazil’s next crop based on the excessive rains, trouble in the last harvest and the lack of money for fertilizer because of prices below production for most of the last year,” said another green coffee buyer. “This is now aggravated multiple times by the drought and some people are starting to ask whether the next crop may actually fall to as low as 40 million bags,” he told SpillingTheBeans. And on top of all those worries, Central America – a region that traditionally accounts for about 20 percent of the world’s Arabica production – continues to struggle with the worst outbreak of rust disease in history, which already caused losses of at least 20 percent in the last crop cycle and in the current harvest is seen down even further. Just last week El Salvador’s Coffee Council said harvest figures for coffee picked to date was at historical lows and cut their forecast, now seeing the new harvest down 56 percent on the year. Arabica futures have strengthened over 23 percent in the last two days, the biggest gain in two consecutive trading days seen in 14 years, with prices rising almost 33 cents. Since the beginning of the years Arabica futures are up 55 percent, or up by more than 62 cents in net gains, mostly on concerns over the situation in Brazil.
Don’t miss all the background on the current rally and growing supply fears, exclusively brought to you totally for FREE by SpillingTheBeans here:
*For more on Volcafe’s cut in its Brazil figures: https://globalcoffeefund.com/harvest-analysis-volcafe-cuts-2013-14-crop-view-for-brazil-by-3-8m-bags-pegs-14-15-down-to-51m-bags/
*For more on the sharp decline in Vietnam coffee exports: https://globalcoffeefund.com/vietnam-2013-14-coffee-exports-to-jan-31-seen-down-32-to-6-87-million-bags/
*For more on the latest Brazil figures from Somar: https://globalcoffeefund.com/brazils-somar-cuts-estimate-for-2013-14-crop-by-3m-bags-to-51m-bags-predicts-rain-damage-in-2014-15/
*For more on the 1st Conab forecast for the 2014-15 Brazil crop: https://globalcoffeefund.com/brazils-conab-pegs-2014-14-coffee-harvest-in-brazil-down-to-46-5m-51-15m-bags/
*For more on SpillingTheBeans’ analysis for supply-demand balance in the 2013-14 world crop: https://globalcoffeefund.com/market-analysis-world-coffee-market-headed-for-new-deficit-in-2013-14-cycle/
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