ICE coffee stock is not just part of a whole picture. Currently is the expresion of what is happening in the physicals markets.
The coffee market is still dislocated. The price we see in our screen is not really the price of the physical market. Physical markets are negotiated at a very higher price because the price differential. For example a conventional coffee grade 1 in Peru is paid NY Coffee C +30 or a grade 2 +25.
Question: Who is going to deliver Physicals to the exchange? Nobody. The exchange will pay you peanuts!.
Decertification is occurring because for the industry is very cheap to buy that coffee. They are withdrawing coffee every day from ICE warehouses. At this pace, soon there will be nothing left to take out; unless diffs would came down and NY C comes up,. Then we will see ICE coffee stocks replenish.
An important thing to notice is that many Importers went short to a price differential last year and at the beginning of this one. That means they sold coffee to the industry at very much lower price differential than what it is now. Those bulk of coffee Importers, without having the physicals, made a commitment to sell the coffee to the Roasters, i.e lets'say at NYC +10 or +12. Now that coffee is negotiating at +25 and they need to pay those diffs to fullfill their commitments.
They are hemorrhaging losing money!!.
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