(Bloomberg) -- Coffee futures for both the arabica and robusta varieties fell in New York and London as traders monitor inventories available in Europe just as the bloc moved to postpone a landmark law to tackle global deforestation.
The legislation, aimed at curbing forest clearance in nations that send products including coffee to the bloc, brought great uncertainty on what could happen with certified coffee stockpiles held at European warehouses. That’s as some of the market participants were recently betting traders would decertify the coffee prior to the implementation of new rules, which were slated to take effect Dec. 30.
Wednesday’s move by the European Commission, which suggested postponing implementation of such rules, eased concerns over supply disruptions.
Some of the world’s largest coffee traders were already striking deals for supplies they say will comply with the new regulations, known as EUDR. These beans were being sold at a premium of 3 to 5 cents to the price of futures traded in New York. It’s unclear if the deals will be unwound or the premium dropped if the regulations get delayed.
Arabica coffee prices, which rallied to a 13-year high last week, fell as much as 3% in New York. Robusta retreated as much as 6.4% in London.
Still, the potential EUDR delay is not expected to offset the current tightness in global coffee supplies, said Carlos Santana Jr., a Brazil-based commercial director at trader Ecom Group. “The market needs to focus on the supply and demand scenario,” he added, pointing to the risk of dryness in top coffee producers Brazil and Vietnam resulting in a supply deficit in the current 2024/25 season.
Commodity trading advisers, which use trend-following algorithms to wager on futures prices, were near maximum long positions in the cocoa and coffee markets, but are now liquidating positions, said Stephen Roseme, managing member of Bridgeton Research Group LLC. Additional selling of arabica coffee may occur around $2.50 a pound, he added.
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