Arabica coffee rallied to a one month high on Friday, rising 3.9 percent to 3.0625 dollars a pound in early afternoon trade in New York, as traders focused on how little deliverable coffee sits in exchange warehouses. ADM Investor Services put the move as the highest level since September 1 and noted that it came despite a bumper Brazilian crop and a surge in Brazilian exports since August.
ICE certified arabica stocks fell by 2,971 bags on Thursday to 238,976 bags, their lowest since September 16 and close to the 27 year low of 217,646 bags set last month. The concern in the market is timing: dealers told Reuters that Brazilian shipments may not reach ICE warehouses before the December contract expires, leaving too little graded coffee available for delivery against expiring positions.
The stocks problem persists even though physical supply exists. Brazil’s harvest was large and exports have risen, but certified stocks have barely recovered, which traders read as buyers paying up to rebuild deliverable supplies rather than a shortage of coffee in the world at large. El Nino is an added support, with a USDA report this week saying the pattern will likely hurt Brazilian coffee production, and Uganda’s August exports fell 13.7 percent year on year on drought, ADM reported.