Coffee will be more expensive

The price of Arabica reaches its highest level in 18 months.

With an increase of over 13% just last week. Commodity price for (green) Arabica coffee is now USD 4,73 / Kg (NOK 50,16/Kg).

This price increase is driven by a combination of several factors, including a positive macroeconomic outlook and a broader upward trend in the commodity market. In particular, there has been a persistent scarcity of robusta coffee, which has led to record high futures prices and high differentials. In Brazil, one of the largest producers of Arabica, there has been normal to above-normal rainfall, but early fruit drop from flowering trees may indicate potential quality issues for the upcoming 2024-25 season.

On the storage front, ICE-certified arabica stocks have increased to 628,217 bags, while robusta certificates have fallen to 3094 lots. Arabica has broken through several resistance levels and reached its highest point in 18 months. The market, which was previously stable, has now become volatile as system buying programs have strengthened long positions. Although the price rise put many coffee roasters to bed, a hesitancy to follow prices has dominated. The persistent deficits of robusta over the past three years have redirected demand towards arabica, which gives an optimistic picture for the market.

In Brazil, local market dynamism has pushed prices up, with conilon (robusta) trading at R$1050.

Arabica producers have targeted R$1100, achieved significant sales, pushing price ideas up to R$1200. Exporters have hedged and reduced nearby shorts. Robust arabica trade and falling replacement differentials signal favorable conditions for Brazilian farmers, securing future business for the 2024-25 season. In March, record shipments of around 3,4 million bags were recorded, further draining carry-over stocks, although they are still higher than historic lows.

Weather-wise, the favorable conditions continue, with less concern that the expected rain showers will affect the drought areas. With these insights, market players and coffee buyers can expect continued volatility and possibly higher prices in the future.

Coffee enthusiasts have had an exciting week as the price of Arabica coffee has skyrocketed, with an increase of over 13%. This price rally is driven by a combination of factors, including a positive macroeconomic outlook and a broader upward trend in commodity markets. In particular, there has been a persistent scarcity of robusta coffee, which has led to record high futures prices and high differentials. In Brazil, which is one of the largest producers of Arabica, there has been normal to above-normal rainfall, but early fruit drop from flowering trees could indicate potential quality problems for the upcoming 2024-25 season.

On the storage front, ICE-certified arabica stocks have increased to 628,217 bags, while robusta certificates have fallen to 3094 lots. Arabica has broken through several resistance levels and reached its highest point in 18 months. The market, which was previously stable, has now become volatile as system buying programs have strengthened long positions. Although the price rise took many coffee roasters to bed, a hesitancy to follow the prices has dominated. The persistent deficits of robusta over the past three years have redirected demand towards arabica, which gives an optimistic picture for the market.

In Brazil, local market dynamism has pushed prices up, with conilon trading at R$1050. Arabica producers have targeted R$1100, achieved significant sales, pushing price ideas up to R$1200. Exporters have secured cover and reduced nearby shorts. Robust arabica trade and falling replacement differentials signal favorable conditions for Brazilian farmers, securing future business for the 2024-25 season. In March, record shipments of around 3,4 million bags were recorded, further draining carry-over stocks, although they are still higher than historic lows.

Weather-wise, the favorable conditions continue, with less concern that the expected rain showers will affect the drought areas. With these insights, market players and coffee buyers can expect continued volatility and possibly higher prices in the future.