Coffee prices drop as Brazil’s forecast picks up

The fears­ over this year’s global coffee supply could be easing as coffee prices fell to their lowest levels in nearly twelve months on the back of industry insiders and investors responding to expectations emanating from Brazil.

Arabica prices dropped just shy of 5% (4.9%) to settle at an average of $1.6 a pound on the United States based ICE Futures exchange. That figure marked the lowest trading total for coffee since last February.

This tumble came at a time when many investors were bracing themselves for another price rise. Many prime growing locations in Central and South America have been battling with coffee rust disease which has severely impacted yields and driven prices up, whilst forecasters were keeping a keen eye on Brazil and weren’t seemingly impressed with what they were seeing. A number had been warning that problematic weather conditions would limit this year’s harvest, something which we referenced not that long ago.

Cooxupe, a large-scale Brazilian cooperative, for example, issued a warning only last week after limited rainfall in January.

However it appears that the weather in Brazil – the largest producer of coffee in the world – has been better than many expect. But this didn’t come as a surprise to James Cordier of the Liberty Trading Group.

“The idea that the coffee crop would be weighed down by dry weather conditions is just incorrect,” he said. “The drought is far behind us.”

Additionally, there are reports that the amount of coffee shipped has also increased by around 10% according to CeCafe, the Brazilian export company. This has mainly been attributed to the tripling of sales of robusta. Arabica exports have also increased, but not by much.

If you’re looking to buy a lot of coffee this year – or are even, potentially, a long-standing customer of the major chains – then this represents some good news. Farmers and exporters on the other hand could be bracing themselves for lower financial windfalls.