Arabica Coffee Trades Near 18-Month High as Cocoa Frenzy Spreads

Arabica futures reached their highest level since October 2022, as hedge funds exiting the cocoa market began investing in coffee. Money managers increased their bullish bets to the highest on record in the week ended April 2, while investors reduced bullish bets in cocoa after a record-breaking rally that saw prices more than double this year. This presents the largest net speculative position in coffee futures history without a significant story outside the cocoa market. Technical factors support investors’ optimism over arabica, as the last time futures hit as high as they are now was in 2022, with no short-term resistance. The recent increase in arabica futures has widened the contract’s premium over the cheaper robusta bean, but the spread between the two varieties remains historically low, meaning roasters are likely to replace robusta for arabica in their blends.

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