SOFTS: Coffee Futures Rise After Starbucks Signals Ample Demand

By Marvin G. Perez

Arabica coffee rose for the third time in four days after results from Starbucks Corp. signaled ample demand.
In fiscal 2020, global comparable Starbucks sales, a key metric for the restaurant industry, will be up 3% to 4%, the company said Wednesday, shy of the brisk 5% pace in 2019. CEO Kevin Johnson said the world’s largest coffee-shop chain is accelerating growth in U.S., the top consumer, and China.

Supplies are forecast to drop for the premium arabica beans favored by Starbucks with projections for a global deficit of as high as 7.5m bags. Nestle SA said earlier this month that its 3Q coffee sales rose for the second straight quarter in “mid-single digits.”

Drivers
Arabica futures recently topped the 200- and 50-day moving averages and may breach the 100-day gauge
Stockpiles of arabica beans monitored by ICE Futures U.S. are down 1.6% in October, the seventh straight drop to mark the longest slump since September 2016

Prices
Arabica-coffee futures for December delivery rose 1.7% to $1.0105/lb on ICE in New York
Cotton futures for December delivery fell 1.8% to 64.54c/lb,
A close at that price would mark the biggest drop since Oct. 14
NOTE: China Said to Doubt Long-Term Trade Deal Possible With Trump

Market commentary
Starbucks “featured better than expected sales results, which point toward improving global demand prospects,” Chicago-based Hightower Report says
“Demand has been overshadowed by ample global supply this year, but it has seen gradual improvement over the past few months, which should help to underpin price”
“There have been ongoing reports of quality issues with Brazil’s 2019-20 ‘off-year’ crop”
This may cut into this season’s arabica production and might damp the nation’s exports “after the very large monthly totals seen earlier this year”