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Coffee prices, as measured by the ICE futures KCK’22 contract, continue to be very volatile. After peaking at $2.6045 on February 10, prices sold off 50 cents (19%), trading as low as $2.1015 on March 15.
There have been a few reasons for the drop in prices. Commodity funds have put on long positions in the coffee futures market the past 15 months, which has helped to push prices to these recent high levels. On Feb 15, this Speculative position was 53,279 lots, close to a record long position. The past month, these funds have sold off approximately half of this position, with the long position now at just under 25,000 lots.
Another factor has been some small improvement in global shipping and port delays, we’re hoping to see shipping prices begin to normalize by the end of this year but they still continue to be significantly higher compared to pre-covid pricing. Recent export numbers out of Brazil and Vietnam have improved, helping to get coffee to roasters.
Another reason has been a recent build in ICE Certified coffee warehouse stocks. After seeing these stocks drop under 1 million bags recently, the most recent data show these stocks to be 1,072,292 bags. And there are currently close to another 100,000 bags pending certification.
So where does price go from here? The upcoming harvest in Brazil will undoubtedly influence price. Estimates of the size of the arabica crop vary anywhere from 35 million to 45 million bags. Time will tell, harvest will begin in May and the trade will keep a close eye on Export number starting in July’22.
Until then, we continue to recommend adding short term coverage to secure availability of needed inventory, most especially those coveted early shipments of new crop coffee from Central America.
Having trouble keeping track of the daily coffee “C” price? Try these two sites…they offer slightly delayed quotes but can be a useful tool to follow along.
Talk soon,
The RNY Trading team
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