The coffee market is experiencing intense volatility. Anxiety surrounding the weather and early indications regarding the size of the next Brazilian crop, the decline in certified stocks on the NYSE, and fears of an escalation in trade tensions between China and the United States have brought a heavy load of uncertainty and strengthened price instability. Improved rainfall in Brazil and especially the meeting between Brazil and the United States to discuss the possible exemption from coffee tariffs brought some relief.
The sharp reduction in certified stocks in New York keeps the December/25 position under intense pressure, functioning as a “time bomb” ready to explode. This situation explains the significant gains and high volatility, reflecting a squeezed market—with more buyer than seller interest in short positions. The movement is more financial than fundamental. It is worth remembering that the December/25 contract options expire on November 12, and the first notice day for physical delivery is November 19, which is already causing market agitation.
As a result, exporters have been avoiding the December/25 contract, concentrating shipments from December onward and using the March/26 position as a pricing reference. Currently, March/26 is approximately 20 cents per pound below December/25, a difference that is reflected in physical price formation and explains the domestic market’s difficulty in keeping up with the futures market’s hike. This negative spread widens across the maturities—September/26, for example, is about 60 cents below the spot contract (equivalent to 6,000 points).
