Coffee Market Summary for November 25–29, 2024
Despite a decline in coffee prices at the end of the week due to the weakening of the Brazilian Real, leading to speculative selling, the overall market performance for the week was notably strong. Arabica futures for March 2025 closed at 318.05 cents/pound, a significant rise from 302.10 cents the previous week. Robusta prices also surged, closing at $5,409/ton, up from $4,985/ton.
Market Drivers: Arabica Takes the Lead
Last year, the Robusta market was the main driver due to poor harvests in producing countries affected by drought and unfavorable weather under El Niño conditions. However, this year marks a shift, with Arabica taking the spotlight. Arabica prices reached their highest in 47 years, fueled by adverse weather conditions in Brazil and Vietnam—the world’s largest coffee producers—which are now threatening global coffee output.
According to Sucden Financial, the price surge prompted some Brazilian exporters to unwind hedges and buy futures contracts to cover their short positions, further driving up the market.
El Niño's Long-Term Impact
The dry El Niño weather earlier this year has caused long-term damage to coffee crops in Central and South America. Brazil, in particular, has experienced below-average rainfall since April, harming coffee trees during flowering and dimming prospects for the 2025/26 Arabica crop.
The extended dry spell, combined with higher-than-average temperatures, has severely affected regions like Minas Gerais (southern areas and Cerrado) and São Paulo, resulting in the worst moisture deficits since the drought of 1981. Many areas have reported significant flower drop, diminishing production potential and justifying the current price rally.
Robusta Market Outlook
While Robusta prices dropped by $150 on Friday due to the weakening Real (at 6.014 BRL/USD), the January 2025 contract remains at a critical resistance range of $5,534–5,579. A breakout above this range could signal further gains. However, a significant dip below $5,149 could lead to a downward correction, similar to early November.
Certified Stock Levels and Historical Context
Certified Arabica stocks in New York remained unchanged over the Thanksgiving holiday, recorded at 903,548 bags. Notably, the Arabica market’s recent surge to levels unseen since 1977 mirrors the aftermath of Brazil’s devastating frost in 1975, which severely impacted coffee production.
Additional Market Factors
- Vietnam’s Delays: Slow exports of Robusta from Vietnam, coupled with a weaker harvest, have added to the upward price pressure.
- Winter Demand: Rising global coffee demand, particularly in the Northern Hemisphere during winter, further emphasizes the upward trend.
Technical Momentum
The recent price escalation has been driven by strong technical momentum. The breach of the psychological 300-cent level for Arabica has bolstered bullish sentiment, with the market overcoming new resistance levels and maintaining its upward trajectory. Parallel price increases in cocoa have also indirectly supported the coffee market.
With the U.S. Thanksgiving holiday creating a quiet news cycle, the market's fourth consecutive week of gains on both Arabica and Robusta futures underscores strong underlying support for continued price increases.