Key facts
- Traders plan to deliver significant volumes of arabica coffee from Brazil to ICE exchange warehouses.
- ICE arabica stocks have sunk to 26-year lows, influencing global coffee prices.
- The arabica coffee contract hit a six-month high above $3.5 per lb in July.
- Shipments from Brazil could more than double current ICE certified stocks.
- Olam is seeking to certify 150,000-200,000 bags for the December futures contract.
- Louis Dreyfus Company is also attempting to certify coffee for delivery.
Traders are preparing to ship substantial quantities of arabica coffee from Brazil to ICE exchange warehouses, a move that could significantly increase inventories and pressure prices. ICE certified stocks, a key indicator of global coffee surplus, have fallen to their lowest level in 26 years, contributing to sustained high prices around $3 per lb.
Analysts suggest that algorithm-driven funds are programmed to sell when exchange stocks rise, potentially accelerating any price decline. Olam, a major trade house, is reportedly seeking to certify between 150,000 and 200,000 bags for delivery against the December futures contract, while Louis Dreyfus Company is also making similar efforts. Both companies declined to comment.
ICE certified stocks have dwindled to under 220,000 bags, a stark contrast to the 1 million to 5 million bags typically held from the mid-2000s to early 2022. While the expected deliveries of around 300,000 bags may not reach levels considered comfortable by traders, they are anticipated to weigh on prices. Higher-than-usual shipments to Belgium, a key hub for ICE certified coffee, are often seen as a signal of excess supply heading to the exchange. In August, Brazil's coffee exports to Belgium surged 245.3% year-on-year to over 525,000 bags. Exchange data shows over 62,000 bags of Brazilian coffee have already arrived at depots and are awaiting quality checks for certification.