Apr 15, 2024

StoneX’s Hernando De La Roche on the Precipitous Rise of Arabica Coffee Futures

Coffee dealers are scrambling to cover short positions as increased demand and bullish investor behavior push Arabica coffee futures to their highest peak since 2022.  

As prices edge towards a rise of 12% - the highest since July 2021 - the front-month futures contracts climbed as much as 2.9% to $2.1175 a pound on Friday, April 5th, in New York, reaching levels not seen for nearly 18 months.

But what is driving these unexpected price movements?

StoneX Senior Vice President of Trading Hernando De La Roche offered insight in a recent article on Bloomberg UK.

“Dealers have been caught short and forced to cover while funds have been adding long positions”, he explains. “At the same time, importers may have been forced to lift hedges.”

The dizzying rise of arabica coffee futures has roots in production and supply issues concerning the robusta variety of the coffee bean, commonly used in lower-quality coffee products like instant coffee.

Vietnam, the world’s largest producer of robusta beans, has experienced unfavorably dry and warm weather that is negatively impacting output; demand for premium arabica beans has increased accordingly.

In Brazil, roasters seeking a replacement for robusta varieties are turning to lower quality arabica beans; these beans are currently trading at lower prices than robusta in the local Brazilian market. 

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