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Market Update 24/02/2023


Coffee prices continued their upward trajectory this week with both arabica (+6%) and Robusta (+1.8%) posting gains across the course of the week by market close on Thursday in New York and London respectively.


Arabica coffee futures closed higher last week as bullish fundamentals continued to support the market. The most active arabica contract for May delivery settled at 185.75 USC/lb on Friday in New York. Backwardation also increased, reflecting a possible supply tightness in the short term. The market continued to gain over the course of the week to close at 190.15 USC/lb overnight in New York.

The Robusta May contract closed at $2,098 USD/mt on Friday last week in London and then continued to climbed over the week to settle at $2,158 USD/mt.


Both markets managed to break out of their recent trading ranges, mainly on the back of speculative buying and reduced sales on the part of producing countries. Typically, producers halt sales after the beginning of the delivery period and the Carnival holiday in Brazil also kept producers out of the market.


Coffee prices reached 4-1/2 month high on Wednesday, with the arabica KCK23 May contract briefly topping 194 USC/lb. The market was dominated by short-term speculators covering open positions in anticipation of the return of producers to the market. The market also displayed strong technical indicators, encouraging speculative buying but there were warnings that the market is overbought, opening the door for a future correction.


Short covering eased by market close overnight in New York (arabica) and London (Robusta) respectively and prices dropped slightly as funds chose to take profit after a day of light trading and with overbought indicators to consider. Concern around short-term supply served to keep the fall in prices to a minimum. The US dollar also strengthened to a 6-week high in anticipation of further rate increases, which placed moderate pressure on coffee prices as the Latin-American currencies depreciated.

 

The information contained in this blog is intended to be general in nature and should not be taken as constituting professional financial advice. It does not take into account your objectives, financial situation or needs. We recommend seeking independent financial advice before acting on any of the information contained within.

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