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Coffee Futures Flat as Trade Picks Up

April 6, 2017 at 17:43 by Andrew Moran

Coffee futures are trading flat on Thursday as the market becomes busy again. Asian coffee supplies are driving the momentum in the market amid concerns that there may be hiccups in Brazil’s crop. With demand surging, supplies are trying to keep up, preventing traders from making a bet in either direction.

May coffee futures rose $0.10, or 0.07%, to $1.3740 per pound at 17:15 GMT on London’s ICE Futures Exchange. Coffee prices are trading at their lowest levels since late December. Year-to-date, coffee futures are down more than 1% and have been steadily declining since hitting a November peak of $1.80.

The Indonesian coffee harvest is blooming as one trader recently noted that there were were about 1,400 to 1,500 tonnes of coffee beans arriving at a single storehouse this past week.

Meanwhile, Vietnam, the world’s second-largest exporter of coffee and Indonesia’s main trade rival, has seen its production levels slow down this month as markets were closed on Thursday. Experts note that farmers have been reluctant to sell coffee beans due to the thinning stockpiles. It is estimated that between 20% and 30% of bean stocks are left, and many of the beans remain low-quality due to the extended rainfall in December. Because beans from Vietnam’s recent harvest are poor quality, the rejection ratio throughout the taste test has been higher than normal.

The arabica market has been volatile over the last 12 months. Arabica prices surged amid a massive decline in production. This trend reversed late last year as weather conditions in Brazil changed. The robusta market has been negatively impacted since March because of poor weather conditions and weak crop prospects.

Global coffee demand has been steadily rising, particularly in the North American market. Despite earlier concerns that the older demographic was reducing its coffee consumption, the younger demographic has taken over and imbibing coffee at a faster pace.

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