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Coffee Futures Making Slight Gains Heading into Holidays

December 21, 2016 at 18:15 by Andrew Moran

Coffee futures are looking to gain some momentum heading into the holiday break. After plunging more than 20% over the past month, coffee prices may try to make modest gains entering into 2017.

March Coffee C futures rose 0.34% to $1.4435 per pound at 16:46 GMT on Wednesday on the ICE Futures exchange. Coffee tumbled less than 1% near the start of the trading session before paring its losses. Coffee has been steadily climbing since then.

The commodity started off the year at around $1.20, but ever since hitting a peak of a $1.78 in November, coffee futures have been on a downward spiral. If coffee is able to continue piling on the losses then it could morph into a bear market entering 2017.

For much of the year, coffee has been plagued by dwindling supplies, particularly in the robusta market due to poor crops in Brazil and Indonesia. This has changed in recent months as supplies have improved, but producers are warning that harvest delays could still slow shipments for the next little while.

Traders were initially betting that supplies would be unable to meet demand because of dwindling robusta supplies, a bean that is primarily used for instant coffee. Earlier this month, however, a report found that arabica supplies could help minimize the gap. As robusta supplies return to normal heading into next year, the arabica market will not have to fill any gap. Brazil’s biggest concern may be a soaring real, which makes commodities like coffee and orange juice more expensive for foreign investors.

Arabica supplies have surged since early autumn after heavy rainfall devastated crops.

All of this is good news for consumers, whose appetites for the classic beverage remains fierce. Reports suggest that global consumer demand for coffee is strengthening, and this is thanks to the millennial demographic. Experts say that millennials are making up for weakening demand from older consumers as younger adults get hooked on the drink at an earlier age.

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