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10574 views February 14, 2014 posted by Maja Wallengren

MARKET INSIGHT: Mar Arabica Coffee Ends Week Up 4.5 Cents At $1.3990/Lb On Concerns For Looming World Deficit

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FEB 14 (SpillingTheBeans)–March Arabica coffee futures closed 0.20 cent higher on Friday at the ICE futures exchange in New York, settling at $1.3990 per pound, but extending gains from the week-ago level by a full 4.50 cents in another impressive week with Arabica futures performing strongly in the face of growing concerns of the next crop in Brazil and a looming world deficit. Prices have strengthened close to 30 percent since the beginning of the year, or about 32 cents per pound, on the combination of growing crop problems in the world’s largest producer Brazil, sharply lower than expected exports out of the second largest grower Vietnam, and continuing lower forecasts out of Central America because of the ongoing outbreak of the crop pest coffee rust. More forward May Arabica futures settled up 0.35 cent at $1.4230/lb.

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FEB 13 (SpillingTheBeans)–March Arabica coffee futures weakened a tad on Thursday as profit taking hit the ICE futures exchange in New York with prices settling down 1.35 cents per pound at $1.3970/lb. Traders said, however, it was “surprising to see prices holding up so strongly” against profit taking, considering the market has strengthened over 30 percent since the beginning of the yeat. More forward May Arabica futures settled down 1.20 cents at $1.4195/lb.

FEB 12 (SpillingTheBeans)–March Arabica coffee futures continued to rally on Wednesday in another strong performance at the ICE futures exchange in New York which took nearby prices to settle up 3.90 cents per pound at $1.4105/lb. The market was riddled with renewed concerns over the ongoing drought in the world’s top producer Brazil, which follows an extended period of excessive rains in December which Brazilian weather forecasters Somar said already damaged between 30 and 40 percent of the 2013-14 Araboica crop in Southern Minas. More forward May Arabica futures settled up 3.70 cents at $1.4315/lb.

FEB 11 (SpillingTheBeans)–March Arabica coffee futures extended gains on Tuesday and rose another 0.95 cent per pound at the ICE futures exchange in New York to settle at $1.3715/lb. The market opened higher and traded higher for most of the session with heavy volume in one of the most busy trading days in months. More forward May Arabica futures settled up 1.00 cent at $1.3945/lb.

FEB 10 (SpillingTheBeans)–May Arabica coffee futures extended gains on Monday at the ICE futures exchange in New York, settling up 0.60 cent at $1.3845/lb as the market continued to be dominated by concerns over the potentially most severe drought in 20 years in the world’s largest coffee producing country Brazil.

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FEB 7 (SpillingTheBeans)–May Arabica coffee futures closed flat at $1.3785 per pound on Friday but held out against several attempts on profit-taking in a session that continuously moved in a 10-cent range. Futures opened lower across the board but early attempts by the bear camp to drive prices further down after heavy profit taking in the previous session were quickly proven unsuccessful and throughout the rest of the session prices moved between a low of $1.3410/lb and a high of $1.4480/lb. “The market continues to be weighed down on concerns over what could be a prolonged drought in Brazil and potentially cause massive damage to the new and developing 2014-15 crop,” one trader told SpillingTheBeans by telephone from New York. But despite neither bear or bull attempts to change the direction of the market Friday managed to hold, futures ended the week up 14 percent, or almost 18 cents higher since the Super Rally last Monday, while prices have strengthened an impressive 25% since the beginning of 2014, or the equivalent of over 27 c/lb in net gains.

FEB 7 (SpillingTheBeans)–May Arabica coffee futures closed flat at $1.3785 per pound by mid-morning Friday after heavy profit-taking in the previous session. Futures opened lower across the board but early attempts by the bear camp to drive prices further down were quickly proven unsuccessful as the market “continues to be riddled with concerns over what could be a prolonged drought in Brazil” with severe crop impact, one trader told SpillingTheBeans by telephone from New York. More forward May Arabica futures were trading up 3.45 cents at $1.4125/lb. (10:15a.m. EDT)

FEB 6 (SpillingTheBeans)–Arabica coffee futures were hit by profit taking on Thursday after a 3-day rally that resulted in net gains of 17.90 cents, with the March contract closing down 7.35 cents per pound at the ICE futures exchange in New York at $1.3575/lb. Concerns over the potentially most severe drought in 20 years in the world’s largest coffee producing country Brazil continued to weigh heavily on the market, traders said. Net gains are still over 10 cents since Monday’s Super Rally and Wednesday’s 9-month high of $1.4310/lb, while prices overall have strengthened close to 30 percent since the beginning of the year, or some 30 cents per pound. More forward May Arabica futures settled down 7.25 cents at $1.3785/lb.

FEB 5 (SpillingTheBeans)–March Arabica coffee futures continued to rally on Wednesday, holding on to the full 11.05 cents gained in the previous two sessions following Monday’s super rally, and surging 6.85 cents per pound at the ICE futures exchange in New York to settle at $1.4310/lb. The market opened a tad lower but what appeared to be predictable profit taking was quickly turned around as roasters and funds quickly returned to bull-mood and continued their buying spree to cover short positions. Concerns over the potentially most severe drought in 20 years in the world’s largest coffee producing country Brazil weighed heavily on the market, traders said. More forward May Arabica futures settled up 6.70 cent at $1.4510/lb.

FEB 4 (SpillingTheBeans)–March Arabica coffee futures extended gains on Tuesday, holding on to the full 10.75 cents gained in Monday’s super rally and rising another 0.30 cent per pound at the ICE futures exchange in New York to settle at $1.3625/lb in fresh 9-month-highs. The market continued to be dominated by concerns over the potentially most severe drought in 20 years in the world’s largest coffee producing country Brazil. More forward May Arabica futures settled up 0.55 cent at $1.3840/lb.

FEB 3 (SpillingTheBeans)–March Arabica coffee futures entered a frenzied rally on Monday, surging a stunning 10.75 cents per pound at the ICE futures exchange in New York in what was a near 10-year session high and settling at $1.3595/lb in a near 9-month-high. Prices opened a tad lower across the board as the bear camp in the market — which is trying to convince traders there is plenty of supply available in producing countries for now — tried to push prices back down below the $1.20/lb barrier. But the attempt quickly failed as panic over the growing numbers of reports all indicating the real possibility of a looming drought in Brazil set in with concerned traders and funds, who went on a buying spree to cover short positions.

The growing possibility of a drought causing severe damage to the continuing development of the next 2014-15 harvest in Brazil, the world’s largest coffee grower where the flowering already has been reported to be damaged by excess rains in December, comes on top of reports last month that three major forecasts all had cut their predictions for the current 2013-14 harvest after lower than expected yields had materialized in final production numbers.

As actively reported by SpillingTheBeans for months, the growing uncertainty over the Brazil crop numbers both in the current and next harvest also coincides with export figures from Vietnam, the second largest coffee producing country in the world, during January for a 4th month straight falling sharply below expectations. More forward May Arabica futures settled up 10.65 cents at $1.3785/lb.

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*For more on Volcafe’s cut in its Brazil figures: http://spilling-the-beans.net/harvest-analysis-volcafe-cuts-2013-14-crop-view-for-brazil-by-3-8m-bags-pegs-14-15-down-to-51m-bags/

*For more on the sharp decline in Vietnam coffee exports: http://spilling-the-beans.net/vietnam-2013-14-coffee-exports-to-jan-31-seen-down-32-to-6-87-million-bags/

*For more on the latest Brazil figures from Somar: http://spilling-the-beans.net/brazils-somar-cuts-estimate-for-2013-14-crop-by-3m-bags-to-51m-bags-predicts-rain-damage-in-2014-15/

*For more on the 1st Conab forecast for the 2014-15 Brazil crop: http://spilling-the-beans.net/brazils-conab-pegs-2014-14-coffee-harvest-in-brazil-down-to-46-5m-51-15m-bags/

*For more on SpillingTheBeans’ analysis for supply-demand balance in the 2013-14 world crop: http://spilling-the-beans.net/market-analysis-world-coffee-market-headed-for-new-deficit-in-2013-14-cycle/
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As always, we welcome your comments heart

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6 Comments

  • Late night reading, of your old posts from January 6-9 of Brazil estimates.

    volcafe – 51 million bags
    Sumar – 51 million bags
    Conab – 46.5 – 50 million

    And that was one month ago. No rain in sight for Brazil in the next two weeks. And Tet is over and every farmer is holding on to their physical beans all over the world waiting for the prices to go even higher. Oh boy, there’s going to be alot of drama between farmers and roasters! Unfortunately for small famers who sold to the big mills already, they won’t be benefiting in this rally. – Scott

    • Hi Scott, yes these figures suddenly become more significant, and even more so when you consider that figures for production in the current 2013-14 crop in Brazil ALSO were lowered by 3.8 million bags, there go all the buffer in terms of surplus stocks, and — not to brag 😉 — but that was exactly as my first analysis on the 2013-14 crop year had the scenario laid out all the way back in July last year;

      http://spilling-the-beans.net/market-analysis-world-coffee-market-headed-for-new-deficit-in-2013-14-cycle/

    • … and even more — and that it so far off it’s just becoming plain ludicrous — but Bloomberg supposedly surveyed 10-12 major traders/exporters around mid-January who all insisted that the Vietnamese farmers would sell “at least 30 percent” of their stocks BEFORE Tet, so since this clearly has not happened — on the contrary, exports continue to fall BELOW year-ago volumes — it’s about high time that Bloomberg either come out with a story trying to explain why this did not happen or you got a wonder whether they actually surveyed more than just a couple of traders or why all their supposedly best sources on top of the game in Vietnam are SO bad and can be SO wrong. Shameful!

  • From Tico Times:

    Interesting aspect of this article, because of lack of rain, only 1 application of fertilizer has been made in Brazil’s coffee farms when normally 3 has been made by now. Fertilizer also requires rain, and coffee needs alot of fertilizer. Rain won’t be enough, Brazilian coffee is also missing essential nutrition. -Scott

    http://www.ticotimes.net/2014/02/08/black-heart-in-brazil-heat-drives-coffee-turnaround

    • I saw this, very interesting… by the way, did you get my email?

  • Now that the 2013-2014 cycle is history, might as well speculate for 2014-2015 and 2015-2016. Obvious for Brazil, if these trees begin to skeletonize due to lack of fertilization and water, the leaves drop along with the cherries. These nutrient depleted trees will need a year to recover. Because of the lack of rain and low coffee prices fertilization was minimized in in 2013-2014. Some farms stumped pruned their trees to avoid having to fertilize all together. These trees will provide vigorous growth and production in 2015-2016, but not contribute to 2014-2015.

    If farmers had some extra money, this is the time now to fertilize their crops before the rainy season is over as flowering occurs during the dry season in the the next rainy season, and well nourished coffee trees prior to the dry season will flower well. But many in Central America have abandoned their coffee this year or noted very low harvest in coffee (due to rust and low fertilizer and agrochemical input). Therefore income from coffee, at least from small producers is very low and they won’t be able to buy fertilizer and agrochemicals. If they can secure loans from the bank (at 10-17%) they can begin fertilizing quickly to promote flowering. Without flowering, there is no crop for 2014-2015. But the Dry Season is upon Central America, so there isn’t much time.

    With less money for fertilizer, we will be depending on Colombia for washed coffee next year and large farms in Central America to produce our classic cup. So Coffee prices will remain high for 2014-2015 and Central American Premiums will be high, maybe even higher compared to Colombia. (Right now differentials for Centrals are equal for the first time compared to Colombia.)

    But like 2011-2012, when coffee prices recover, and farmers have money and can apply 6-9 oz of fertilizer per tree three times a year and apply 4-5 folear sprays per year, 2015-2016 will be a big production year. Prices will fall again quickly especially with increase Brazilian Production along with possibly 12-13 million bags of production from Colombia. My 2 beans worth.

    – Scott

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