Arabica futures hit new record high amid uncertainty

A report by Hedgepoint Global Markets analyzes coffee futures prices, which have been trending upwards due to growing uncertainties about global supply. On Monday (25), Arabica futures reached the 311,25 cents/lb mark in the morning, a new record for the contract.

In Brazil, the main concern is the 25/26 harvest, which may have reduced production due to adverse weather conditions, such as drought and high temperatures.

"Although our estimates on conilon production for the period, in relation to 24/25, project an increase of 12,2%, reaching 22,6 million bags, the arabica harvest may show a drop of 1,4%, totaling 42,6 million bags", says Laleska Moda, Coffee analyst at Hedgepoint.

“Initially, we estimated the total supply of coffee in the country at 65,2 million bags, an increase of 2,9% compared to the previous harvest, of 63,4 million bags, but future weather conditions may change our projections”, notes the analyst.

The USDA also revised its 24/25 crop estimate last week, indicating a reduction in production of 3,5 million bags compared to the first estimate, a decrease of more than 2 million bags in stocks, falling to just 1,2 million bags by the end of the cycle.

Stocks and Marketing in Brazil

The 24/25 harvest has seen a strong export pace, which should reduce Brazilian stocks to historically low levels. By October, 70% of the harvest had already been sold, with Robusta reaching 76% and Arabica 67%.

“This high commercialization may limit domestic supply at the end of 2024 and beginning of 2025. Even with factors such as the postponement of the EUDR and possible reductions in European imports, the restricted supply should support prices, especially if losses in the 25/26 Arabica harvest are confirmed,” he highlights.

Global Panorama

In addition to Brazil, other major producers are also facing challenges. Indonesia is entering its off-season, reducing its export capacity.

In Vietnam, Central America and Colombia, 24/25 harvests are gaining momentum, which could bring additional volumes to the market in the short term.

“However, producers, benefiting from high prices in 2023 and 2024, are under less pressure to sell quickly, which helps to sustain prices,” he believes.

Furthermore, recent storms and cyclones in Vietnam and especially in Central America increase supply risks in 24/25. In Costa Rica, for example, ICAFE indicates that around 15% of the 24/25 harvest has been compromised.

Global Stocks and Supply

Global stocks are expected to decline due to the strong pace of exports and heated international demand. Countries such as Vietnam are already showing signs of a decline in trade, while most origins are expected to record lower final stocks.

“This tight supply scenario should continue to influence coffee prices in the coming months, with additional support coming from persistent global demand,” he concludes.