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Coffee Prices Fall as Investors Take Profits Ahead of Olympics

August 3, 2016 at 17:35 by Andrew Moran

Coffee prices took a dive on Wednesday ahead of the 2016 Summer Olympics in Rio. Investors decided to take profits just before the international sporting event started. There were also reports that India, Indonesia, and Vietnam will have smaller coffee harvests this season due to weather-related events.

September Arabica coffee futures dropped $0.04, or 0.3%, to $1.409 per pound at 16:11 GMT on the ICE Futures US exchange. This comes one day after coffee prices rose to fresh weekly highs of $1.4525 a pound.

Prior to the start of the Summer Olympics in Brazil, which is the world’s largest coffee producer, investors made the decision to take profits instead of risk. With many concerns surrounding the Olympics — everything from security worries to the state of current Olympic conditions — investors did not want to threaten any investments they may have made to date.

Coffee sales coming out of Brazil were down nearly 27% year-over-year last month. Moreover, producers of mild Arabica beans in Brazil have tumbled. It is estimated that more than one million bags of coffee have been lost due to freezing. In July, coffee exports decreased to four-year lows amid low inventories.

It was reported on Wednesday that India expects a smaller coffee harvest for the remainder of the crop year. The Coffee Board of India forecasts a decline of 8%, but some analysts peg the figure at 10%. The paucity of coffee output is being blamed on the lower-than-average rainfall throughout the early part of spring, an important time for coffee farmers.

This is terrible news for an emerging market that relies on such a commodity. Coffee is the eighth-largest agricultural export in India and generates close to $800 million a year. It also employs roughly 250,000 farmers every crop year.

Vietnam and Indonesia, which are also two of the biggest producers of coffee in the world, are also expecting lower output volumes because of the lack of rainfall.

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