In my Q1 summary of soft commodities on Barchart, I highlighted that ICE Arabica coffee futures rose 12.55% in 2023 and edged only 0.29% higher in Q1, settling at $1.8885 per pound. On April 12, the nearby ICE futures’ price had rallied to $2.3575 per pound. Coffee prices are slightly higher in late June 2024, remaining comfortably above the $2 per pound level.
A bullish trend in Arabica coffee futures
The one-year July ICE Arabica coffee futures have rallied since the October 2023 low.
The chart highlights the bullish trading pattern that took July Arabica coffee futures 67.3% higher from $1.4665 on October 10, 2023, to $2.4540 on April 18, 2024. At near the $2.40 level in late June, coffee futures remain closer to the high and in a bullish trend.
The difference between Arabica and Robusta coffee beans
Arabica coffee beans tend to be smoother and sweeter with hints of chocolate, berries or other fruits, and sugar. Robusta beans have a harsher and more bitter taste with a grainy or rubbery taste. Robusta beans have up to 2.7% caffeine content, while Arabica beans have less at around 1.5% caffeine. Espresso and Turkish coffees use robusta beans, while most U.S. coffee is made with Arabica bean blends.
The world’s leading Arabica coffee producer and exporter is Brazil, while Vietnam leads in Robusta production.
Robusta futures reached a record high in June
The all-time high in ICE Arabica coffee futures was $3.3750 per pound in 1977. Arabica coffee futures reached lower highs of $3.18 in 1997 and $3.0625 in 2011. Meanwhile, the Arabica beans have not traded above the $3 per pound level in thirteen years.
The chart of ICE Robusta bean futures traded in Europe shows the rally to a record $4,575 per ton in April 2024. The Robusta beans remain close to the record peak, at over $4,450 per ton in late June. Vietnamese production has declined on weather conditions and as farmers have planted other crops instead of the Robusta coffee beans.
The technical target is the February 2022 high
The first technical target for the ICE Arabica coffee futures is the February 2022 peak.
As the twenty-year chart shows, technical resistance is at $2.6045 per pound. After reaching a $1.4205 continuous contract low in January 2023, coffee futures have been trending higher, with the February 2022 high as a technical target.
The ultimate upside resistance is over $3 per pound- There are no coffee ETF products
Coffee is a member of the soft commodities sector, including sugar, cocoa, cotton, and frozen concentrated orange juice. Tropical agricultural products have led the commodities asset class in 2023 and Q1 2024. In 2024, cocoa and frozen concentrated orange juice futures soared to new record highs. Sugar and cotton made multi-year highs over the past two years, and coffee futures rose to the highest price since 2012.
The bullish price action in soft commodities suggests that coffee prices could continue their upward trajectory. The ultimate targets are the highs above the $3 per pound level. Before 2024, cocoa’s record high from 1977 was $5,379 per ton. In April 2024, cocoa futures reached an incredible $12,261 per ton.
Unfortunately, no ETF or ETN products replicate the price action in Arabica or Robusta coffee futures. The only route for a risk position and exposure to the beans is through the Arabica futures and futures options trading on the Intercontinental Exchange in the U.S. and the Robusta futures and futures options on ICE in Europe.
Coffee remains in a bullish trend in late June 2024, and it may only be a matter of time before the Arabica futures challenge the $3 per pound level again, as the trend is always your best friend.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
