This week saw the first proper rally in the coffee markets since October, when the stronger BRL following the Brazilian elections led to a surge in coffee futures. In the past 5 days, NY has risen a whole 10.60 c/lb higher or 12%, while London gained 7%.
Brazil frost season chatter, fears over quality for the new Brazil crop, a recovery in the BRL (from 4.10 to 3.98) and a general uplift in the softs and agri futures complex (led by sharp rally in corn) all combined to push the market higher.
It was not just fund short covering, but also fresh new longs that inspired the rebound. We estimate that the NY net spec position is currently at -58k, compared to the 70.45k net short last reported by the COT on Tuesday. London is estimated at -28K.
The firmer exchange prices have prompted more physical flows at origin. In Vietnam, where 80% of the crop is sold, farmers are selling a little more as prices edge closer to their target levels.
Vietnam’s coffee exports for the first five months of this year are running 13.1% behind the same period last year, with a cumulative total of 12.78 mio bags.
We have seen estimates of the new Brazilian crop range from 53 to 58.9 mio bags this week, of which some 22% reportedly already harvested. Some of the quality concerns voiced reflect multiple flowering last year, which led uneven ripening.
Certified stocks on ICE have fallen to below 2.4 mio bags, while London robusta certs are at 12,500
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