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Coffee Futures Fall As Market Braces for Short-Term Slump

January 22, 2019 at 16:20 by Andrew Moran

Coffee futures are trading lower on Tuesday as a barrage of reports points to one thing: a short-term slump. But this could change as the year progresses, allowing coffee growers to finally start to take advantage of higher prices. Suffice it to say, 2018 was not a great year for suppliers, but it was a great time for companies that sell coffee and the consumers that buy the beverage staple.

March coffee futures tumbled $0.08, or 0.76%, to $1.041 per pound at 14:41 GMT on Tuesday on the US ICE Futures exchange. Coffee prices cratered more than 23% in 2018, but they are up roughly 2% year-to-date.

Last year, farmers suffered because of historically low prices for coffee beans. This trend is likely to incentivize growers to refrain from expanding their supplies throughout 2019. The end result would be a price hike, impacting consumers who benefited from industry changes and a cheaper cup of coffee.

In 2018, there were plenty of industry changes. Coca-Cola spent $5 billion to begin selling coffee, Nestle SA paid $7.15 billion to market Starbucks products, and Starbucks is expanding at a rapid rate in China. All of these moves were designed to boost coffee consumption.

Should these companies be successful in increasing consumption, the heightened demand would put pressure on supplies. Consumption has jumped by an average of 3.6 million bags annually since 2014. And this is exactly what coffee farmers are betting on by reining in output.

According to median estimates, coffee futures are projected to average $1.24 per pound this year, up from last year’s $1.15 average – this was below the five-decade average price.

But a new report has rocked the industry. According to a study by the Science Advances Journal, 75 coffee species, or 60% of the crop, are being threatened with extinction. The other species are considered “critically” endangered or “vulnerable.” Researchers say that a fungal pathogen is spreading among coffee trees, and droughts are further contributing to coffee-rich markets.

Is it time to hit the streets and panic? Not quite, reports Liberty Nation:

One good thing about coffee is the species of trees that may die off still have the potential to be used for coffee breeding purposes. This means they can be manipulated in such a way as to reproduce coffees for the future. Horticulturalists believe they can do this by working with a variety of trees that tend to be more disease-resistant and able to withstand harsh climate conditions. Eventually, this will result in a hardy coffee crop with enhanced sustainability.

In other agricultural commodities, March corn futures shed $0.015, or 0.33%, to $3.805 per pound. March wheat futures slipped $0.03, or 0.58%, to $5.2075 a bushel. March soybean futures fell $0.0125, or 0.14%, to $9.155 per bushel.

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

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