Mon, January 30, 2023

Coffee prices slump as supply fears wane

Coffee

On Thursday, coffee prices were under pressure as signs of easing supply concerns appeared in the market.

Subsequently, US coffee c futures for May 22 delivery slashed 2.53% or 0.05 points to $2.16 per pound. The world benchmark for the arabica bean completely reversed a slight gain of 0.16% to $2.21 per pound yesterday.

The downward movement came after Citigroup delivered an upbeat outlook. The investment bank projected that the 2022/23 global coffee market would shift to a surplus of 3.50 million bags. This guidance edged up from a 2021/22 global coffee deficit of 7.30 million bags.

In addition to the bearish factor, the Green Coffee Association reported an increase in inventories last Monday. The American bean stocks in March climbed 1.00% month-on-month. Consequently, the soft commodity posted an annual gain of 2.50% to 5.82 million bags.

Then, the increased supply from Vietnam weighed on the robusta prices. The country’s January to March coffee exports ticked up 19.40% year-over-year to 541,000.00 metric tons.

Correspondingly, robusta coffee contracts dwindled to 1.07% or 22.00 points to $2.03 per pound.

At the same time, the stronger US dollar undercut commodity prices. Accordingly, the USD index jumped 0.28% or 0.29 points to the 103.25 mark. Then, the currency extended Wednesday’s upturn of 0.68% to 103.00.

Previously, the war between Ukraine and Russia has sparked coffee demand concerns. Market participants feared that the geopolitical crisis could lead to faster inflation, curbing consumer spending.

Investors feared that the conflict could reduce coffee consumption as people tighten their belts and limit their visits to cafes.

Coffee price remains on the bullish track

Meanwhile, several analysts noted that coffee prices could spike in the near term.

Accordingly, Brazil, the world’s leading grower of the commodity, currently grapples with dry weather, supporting bean prices.

For instance, experts reported no rainfall in the Minas Gerais last week. This area accounts for about 30.00% of the state’s arabica crop.

Likewise, worries about tighter global supplies are supportive of bean prices. Earlier this month, Brasília’s coffee export council cited that exports skidded by 5.80% YoY to 3.27 million bags.

Similarly, Colombia, the second-biggest arabica producer, mentioned that its March output decreased by 13.00% annually. This downdraft led to the production of 914,000 bags.

Furthermore, the International Coffee Organization said that global exports dropped by 0.80% YoY from October to February. As a result, the worldwide output posted at 53.20 million bags.

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