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Coffee Flat As Market Expects Global Supply Surplus

February 7, 2018 at 17:38 by Andrew Moran

Coffee futures are trading flat midweek following a new study that expects there will be a global supply surplus in 2018–2019. The Brazil and Vietnam markets are projecting to lead the way, but analysts are prognosticating that this trend will likely end in a couple of years.

March coffee futures dipped $0.001, or 0.08%, to $1.2275 per pound at 16:21 GMT on Wednesday on London’s ICE Futures exchange. Coffee has not had a stellar start to 2018 as prices have tumbled nearly 3% year-to-date. Though coffee has recovered from July’s dramatic drop, the commodity is still far from February 2017’s meteoric surge.

With equities experiencing a rollercoaster, investors are likely attempting to cover their short positions. This would be a boon for soft commodities like coffee and sugar because hedge funds and money managers are maintaining big short positions, which will eventually erode in the coming weeks.

Investors are now beginning to pay attention to forecasts pertaining to coffee.

According to a Reuters poll of 14 analysts and traders, international coffee stocks will reach a surplus in 2018–2019 amid Brazil’s record harvest crop. The experts also note that prices will begin to post modest gains by the end of the year with nations restocking their inventories.

The 2017–2018 crop year has seen global coffee supplies transition to a deficit of 3.15 million 60-kilogram bags. This will then shift to a four-million-bag surplus this year.

Brazil is forecast to post a record crop of 60 million 60-kg bags – 44 million bags of Arabica and 16 million bags of Robusta. Vietnam is projected to harvest 28.5 million bags of coffee.

One trader told the newswire:

(The) market will focus on a large deficit in 2019–20 due to off-years and poor husbandry worldwide driven by low prices.

Other commodities are rallying on Wednesday. March wheat futures jumped $0.1075, or 4.21%, to $4.57 per bushel. March corn futures rose $0.075, or 0.21%, to $3.6425 a bushel. March sugar futures advanced $0.0018, or 1.30%, to 14.02 cents per pound.

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