Horrible! Let’s review the highs and lows on the two coffee exchanges last week. You’ll surely find it scary. If on Friday Nov 29, London reached a peak of 5,730 $/tonne and New York 335.45 cts/lb (#7,395.40 $/tonne), then on Tuesday, December 3, robusta reached a bottom of $4,535 and closed at 4,626 $/tonne while arabica touched 290.05 and closed. 295.50 cts/lb (#6,514.65 $/tonne). Yet in just 3 last trading days last week, London touched $5,193 to close at $5,153/ton Jan 25 basis and New York peaked at 331.70 and closed at Mar 25 basis 330.25 cts/lb (#7,280.75 $/tonne).
This is completely surprising and shocking to people doing coffee import-export business, but it is not strange to financial speculators at all. It would be nonsense to explain the recent climb and wade on the exchanges as due to physical coffee supply and demand factors. Speculators just need to mobilize a little money, turn the volume to let more or less money flow in or out, set the parameters according to their calculations on the exchanges, so the price increases or decreases as they wish.
Trading coffee on a floor like that way forces producers and physical traders to quit the sustainable production to follow the whims of speculators, which means doing business based on unsustainability.
If anyone keeps sticking to the two coffee futures exchanges without giving up immediately or gradually… then they are setting themselves up for suicide, ruin and bankruptcy. It is not surprised that the Indian government recently banned small speculators who dream of getting rich on futures exchanges, advising them to stay away.
There are many things behind the scenes, the speculators and floor owners are actually the ones driving the water puppet stage talentuously, moving the puppets up, lowering them, with just one hand.
The futures exchanges are named robusta and arabica, but the floor owners and financial speculators have been kicking out many professional importers and exporters for several years now. How do they make it so that no one dares to buy and sell physical coffee commodities… Very possibly if they do physicals in large quantities, the amount of buying and selling prices of coffee beans could sometimes be enough to cause trouble to financial traders on the floor!
In reality, global coffee exports in the 2023/24 crop year were in an increase. ICO said that global coffee exports for the entire 23/24 crop year reached 137.27 million bags, an increase of 11.7%.
By all means, such as raising deposits, pushing up arabica prices to force exporters and importers to pay more margin calls… while exporting countries are having difficulty getting credit… Sooner or later our Brazilian colleagues on the other side of the Pacific will have to take their leave and say “no” to the futures exchanges.
With a very thin trading volume on both exchanges on daily basis, but because the actual trading volume is not big enough because of the too risky business of coffee, financial speculators have taken it upon themselves to cause price fluctuations… and the result is great casualties for import and export businesses.
Regarding physical business, buyers and sellers just sit and look at each other, only deals appear where only two partners who truly trust each other will sign a contract.
The price fluctuations were so shocking that they mercilessly kicked the physical traders off the game and perhaps out of the coffee business.
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