It's been an eventful week in the soft commodities space, witnessing remarkable movements across various fronts. NY cocoa surged to 46-year highs, raw sugar plummeted to two-month lows, and notably, arabica coffee soared to nearly six-month highs.
The ongoing narrative in coffee revolves around dwindling exchange certified stocks, marking a historic low not seen since 1999, alongside a robust nearby market structure. Currently, coffee availability in grading rooms stands at less than 30k bags, further underscoring the supply strain.
Brazil's weather remains a critical factor, with anticipated rains next week promising relief. However, overall volume projections for this time of year are expected to fall below average. Concerns persist over dry conditions in key regions like Bahia, northern Espirito Santo, and northern Minas Gerais, with emerging worries in Zona de Mata and northern Cerrado.
Forecasts by Safras & Mercado predict a 5.03% increase in the 24-25 Brazil production, totaling between 69 and 71 million bags. Arabica is set to rise by 6.90% to 46/47 million bags, while conilon is expected to grow by 1.51% to 23/24 million bags.
Arabica has surged to its highest price since mid-June, hitting 1.8470, fueled by decreasing certified stocks and dry Brazilian weather. While the chart shows positivity, there's a note of caution due to overbuying. Key support and resistance levels are closely monitored for potential shifts in market dynamics.
Local markets witnessed a futures rally this week, boosting arabica volume and liquidity, albeit softening nearby differentials. Export markets continue to reflect robust demand, as indicated by November shipment data from cecafe, signaling an ongoing trend.
Despite anticipated rains, persistently high temperatures in coffee-growing regions are impacting soil moisture levels, demanding vigilant monitoring through December. November's rain coverage remained below average, notably affecting conilon growing areas in the North of Espírito Santo and the South of Bahia.