HANOI (Bloomberg): A supply squeeze on coffee has driven the market to rally this year, with robusta rising around 40% in the first six months.
A drought in top robusta exporter Vietnam has hurt crops and could lead to a shortage of the bean for a fourth straight year. Brazil, the world’s top coffee producer, is also on track to harvest a weaker-than-expected crop of the arabica variety, a frustrating development for already tight global markets.
The squeeze on supplies is boosting future prices in both London and New York. While US government figures forecast production to out-pace demand by 5.6 million bags, StoneX sees a tighter global balance sheet that could bring volatility to the market, according to Albert Scalla, senior vice president of trading .
The most active robusta futures are on course for the biggest price rally in the first six months of the year since at least 2008. Arabica is on track for the best start to the year since 2021.
Still, the prospect of some improvement in the weather outlook for both Vietnam and Brazil in recent weeks has driven some money managers to pull back on their net-bullish positions. "The market has lacked the type of bullish news lately to send it to new highs,” wrote analysts at ADM Investor services in a note.
--With assistance from Mumbi Gitau and Dayanne Sousa. -- ©2024 Bloomberg L.P.
