Inflated by a strong financial flow and supported by fundamental fears, coffee breaks resistances and soars on ICE US, reaching its highest level since 2012. On the financial side, the expiration of options and the performance of funds set the tone for the market, helping coffee to break resistances and set new highs. Basically, a tight physical supply and conflicting expectations regarding the development of the next Brazilian crop provide support to the market.
Contrary to the idea of a better production outlook for Brazil’s 2022 crop, given the return of rain to coffee areas in Brazil and the promising blossoming, growers remain skeptical. They report abortion cases, signaling that the blossoming should not be fully successful. And that could increase potential losses for the next Brazilian crop, further reducing Brazil’s arabica supply in 2022.
Climate fears are also growing with La Nina due to excessive rainfall in Colombia and Vietnam. Moisture, besides delaying the flow, can also affect the production result of these important sources. This problem takes on an even greater dimension at a time of tight supply and problems with the flow of shipments.
The expiration of the Dec/21 options last week and the first delivery notice day on November 19 ended up shaking the market and contributing significantly to the price escalation. These dates brought more intense financial dynamics to cover long positions, which reinforced the idea of shortage and helped to push up prices in NY.