Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


Coffee Futures Climb Higher to End Trading Week

June 30, 2017 at 17:24 by Andrew Moran

Coffee prices are climbing higher to end the trading week. Despite the modest gains, analysts still believe that the market has underpriced coffee futures, citing a material surplus transforming into a material deficit. This may be good news for the commodity as coffee prices have plunged 12% year-to-date.

September coffee futures rose $0.012, or 0.08%, to $1.264 per pound at 17:10 GMT on Friday on London’s ICE Futures exchange. Coffee prices have taken substantial hits over the past two months because of supply and demand issues and geopolitical strife.

Analysts from Marex Spectron, a commodities investment house in London, say that coffee futures are underpriced and that selling had gone too far. With arabica supplies transitioning from a so-called material surplus into a material deficit and weather concerns jumping to the forefront in September or October, coffee prices remain too low.

Experts note that the commodity bear market has been going on since 2012, and it could be ready for a breakout in 2018–2019. Brazil is the biggest coffee producer in the world today.

Investors will still keep their eye on politics and weather in Brazil. The Brazilian government continues to be engulfed in scandals as President Michel Temer has been charged with corruption. When it comes to the weather, Brazil is entrenched in winter, which means crops could be damaged by heavy rainfall.

Meanwhile, coffee futures have rebounded in recent trading days as speculators increase their positions in the market. Many of these traders have been covering their net-short positions.

In the short-term, it may be important for investors to focus on the Brazilian real and the US dollar. The exchange rate between the two currencies is important to coffee prices. A weaker greenback is good for dollar-denominated commodities like coffee because it makes it cheaper for foreign investors to buy. Surprisingly, the real has been able to withstand the current situation in Brazil for the time being.

If you have any questions and comments on the commodities today, use the form below to reply.

Leave a Reply