① Although cocoa and coffee beans are not close relatives in terms of the main production area, growth environment, taste, use, and nutritional content; ② However, many hedge funds that are currently leaving the cocoa market at a high level seem to be pouring into the coffee market.
Finance Association, April 10 (Editor: Xiaoxiang) Although judging from the main production area, growing environment, taste, use, and nutritional content, cocoa and coffee beans are not close relatives. However, at present, many hedge funds that have withdrawn from the cocoa market with high profits seem to be pouring into the coffee market.
According to market data, Arabica coffee bean futures are now close to the highest level since October 2022. Previously, Arabica coffee bean futures had just surged 12.5% last week, the biggest weekly gain since July 2021.
According to the latest data from the US Commodity Futures Trading Commission (CFTC), fund managers increased their bullish bets on Arabica coffee futures to an all-time high in the week ending April 2.
Meanwhile, investors have begun to reduce their bullish bets on cocoa after cocoa prices more than doubled this year's record.
Ilya Byzov, a coffee trader at Sucafina, said, “What we are currently seeing is probably the largest net speculative position in coffee bean futures in history. However, apart from the insane cocoa market, there is no fundamental narrative that fully supports its existence.”
(Comparison of major asset increases during the year)
However, Byzov also pointed out that “once the faucet is turned on, speculative interest will take time to stop and reverse.”
Aakash Doshi, a senior product strategist at Citigroup, said in a previous report, “The current sharp rise in coffee prices may be mainly due to Vietnam's heatwave, which has affected the production of Robusta coffee beans, which in turn has indirectly boosted the price of high-quality Arabica coffee beans.”
Marcelo Moreira, who tracks the coffee market for Archer Consulting, said that investors' optimism about Arabica coffee is actually supported by some technical factors. The last time this futures price reached its current high was in 2022, and the rally stopped when it peaked at $2.4 per pound. Currently, it's only around $2.1
He pointed out, “This means there isn't much resistance in the market in the short term.”
It is worth mentioning that the recent jump in Arabica coffee futures also helped expand the contract's premium over cheaper Robusta beans. But even so, the price difference between the two varieties is still at an all-time low, which means roasters are likely to replace Robusta beans more with Arabica beans in blends.