The surge on ICE still looks much more like a realignment between the physical and the futures markets than a change in the fundamental course of the market. The fact is that there is no shortage of coffee. What is happening is the perception of a smaller surplus in the current season, especially in Brazil. The downward review in production, besides record exports in 18/19 and accelerated flow in the current season, ends up projecting very low Brazilian stocks at the end of the 19/20 cycle. And this eases the burden of the projected record of Brazil’s 2020 crop, which induces an upward shift in the market price balance.
Moreover, the movement on ICE also relied on the withdrawal in the sale of milds. And this happens at full harvest, which at first seems normal. Not even the surge on ICE has been able to weaken the selling prices of these origins. The advance of the milds season (Colombia and Central America) is expected to force a new realignment in the market between the physical and futures (distorted) markets, affecting both differentials and ICE in NY.
(ICO different graphics) In this sense, coffee in New York is more vulnerable to some correction. The high dollar, especially against the real, may also weigh against prices on ICE. Even subject to losses, the market must sustain part of the gains accumulated past month, which would confirm the change in the performance level upwards. But the market determinant remains with the size of the next Brazilian crop. Brazilian production continues with a record potential, especially with good rains over the past few weeks.