Coffee futures tumble amid improved supply expectations

ARABICA COFFEE FU TURES CONTINUED ITS DOWNWARD TREND ON THE IN TERCONTINENTAL EXCHANGE ICE, with the market falling by more than 30 percent since late August, partly due to an improving outlook for Brazil’s 2023 harvest and the expectation of higher ICE-certified arabica stocks.

March arabica coffee was down 1.25 cents, or 0.8 percent, at $1.551 per lb. The contract also hit its lowest price in 16 months during the week at $1.5675 per pound. January robusta coffee also suffered a similar fate, losing $7, or 0.4 percent, to $1,811 a tonne. Data from the Commodity Futures Trading Commission (CFTC) also showed funds increased their bearish bets in Arabica following recent developments.

Commenting on the overall bearish trend, a coffee broker said, “It’s complicated to digest a super oversold market that keeps adding more and more, even if it’s not led by origins.”

He added that selling from farmers has been minimal as speculations continued to dominate the market.

On the other hand, sugar futures recorded bullish results as March raw sugar gained 1.6 percent to 20.05 cents per lb, climbing back towards a seven-month peak of 20.48 cents set on Wednesday. The contract also gained 2 percent in the week. March white sugar also rose 1.9 percent at $543.30 a tonne, but the contract lost 4 percent in the week.

Dealers said the market was supported partly by a recovery in Brazil’s real currency as the incoming government sought to assuage fears about fiscal spending. Speculators also added more than 70,000 lots to their long position in raw sugar.

Cocoa futures also traded in bullish territory as March New York cocoa rose $9, or 0.4 percent, to $2,456 a tonne, while March London cocoa was up 6 pounds, or 0.3 percent, to 1,953 pounds per tonne.

Dealers said the market remained underpinned by concern about the potential disruption of the flow of beans from top growers Ivory Coast and Ghana with a Nov. 20 deadline for buyers to factor in a living income differential.

Fitch Solutions explained in a note that the cocoa price rally remains supported by various supply concerns, including uncertainty over Ivory Coast exports.

In Ghana, while no fresh data were available on the level of volumes of graded and sealed cocoa beans for the 2022/23 season, the situation is being closely monitored as the country recorded a drastic cut in production compared to last

season, due in part to the devastating effect of the Cocoa Swollen Shoot Virus Disease (CSSVD), illegal mining on cocoa farms and reduced use of fertilizer due to the high prices.

According to the ICCO, heavy rains observed in the main cocoa growing areas in West Africa were raising concerns over a potential outbreak of the black pod disease, which could subsequently be detrimental to the volume of the 2022/23 cocoa year main crop and consequently result in higher prices for the commodity.

Despite the recovery in grindings in 2021/22 on the back of the economic recovery from the COVID-19 pandemic, mixed results have been posted by members of the European Cocoa Association (ECA), Cocoa Association of Asia (CAA) and National Confectionery Association (NCA), who held about 56 percent of the world share of grindings in 2021/22.

For the 2021/22 cocoa season, cocoa processing activities increased year-on-year in Europe

and Southeast Asia, but dropped in North America. On a crop year basis, the ECA posted data indicating that cumulative grindings in Europe during 2021/22 increased year-onyear by 2.68 percent from 1,434,631 tonnes to 1,473,084 tonnes, while the CAA published data showing a 4.79 percent increase from 863,239 tonnes to 904,597 tonnes.

However, grindings in North America, including the US, witnessed a year-on-year decline of 3.44 percent from 483,078 tonnes to 466,451 tonnes, according to the total quarterly statistics published by the NCA.

The three regional cocoa associations also released reports on volumes of cocoa processed during the third quarter of the 2022 crop year. On a year-on-year basis, in Europe, grindings declined by 1.53 percent to 369,679 tonnes during the quarter. Cocoa transformation activities also declined in North America as it contracted by 3.37 percent to 119,244 tonnes.

However, cocoa processors in South-East Asia were reported to have increased the quantity of cocoa ground by 9.53 percent from 210,970 tonnes in Q3.2021 to 231,080 tonnes during Q3.2022.