Dubai – Qahwa World
Global coffee markets moved higher last week as escalating tensions in the Middle East disrupted key shipping routes and increased freight costs, while supply developments in major producing countries also influenced market sentiment.
Arabica coffee futures began the week at 279.90 US cents per pound and briefly approached the 290-cent level before easing slightly. The market maintained upward momentum through the week, posting marginally higher closes on Wednesday and Thursday. By Friday, prices opened 5.45 cents per pound higher than the previous day’s close, supported in part by reports that Brazil’s coffee exports fell 17.4% year-on-year in February.
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- Shipping routes under pressure
Market activity during the period from March 2 to March 5 was shaped largely by geopolitical developments rather than major supply news from coffee-producing regions.
Military strikes involving the United States and Israel against Iran, followed by retaliatory actions, disrupted shipping activity through the Strait of Hormuz, a critical route for global trade. At the same time, shipping companies remain cautious about passing through the Red Sea amid concerns over possible attacks by Yemeni Houthi rebels.
These risks have forced some vessels to take longer routes around the Cape of Good Hope, significantly increasing transportation times as well as freight and insurance costs. The situation has added new uncertainty to global supply chains, including agricultural commodities such as coffee.
- Weather challenges in Colombia
At origin, coffee production conditions in Colombia remain difficult due to excessive rainfall. Persistent wet weather has affected flowering, maturation, and bean development in several regions, particularly in southern areas where limited sunshine has compounded the problem.
Producers and exporters are also facing economic pressure. The stronger Colombian peso, combined with the recent decline in the C-market price, is expected to reduce revenues compared with the previous year.
As a result, exporters have slowed sales, leading to lower export volumes and rising inventories while waiting for more favorable market conditions when possible.
- Honduras harvest nearing completion
In Honduras, the harvest season has moved well beyond its peak, with more than 75% of the crop already collected. Harvesting has largely finished in lower-altitude regions, leaving mainly higher-elevation farms still gathering the remaining coffee.
Purchasing activity remains mixed. Exporters who secured contracts earlier at higher market prices are continuing to buy coffee cherries and parchment, while others with fewer forward commitments are delaying purchases.
- Currency markets react
Currency markets were also influenced by developments in the Middle East, with the US dollar strengthening following the weekend’s military strikes.
The GBP/USD and EUR/USD currency pairs initially dropped to 1.327 and 1.155, respectively, before recovering slightly to around 1.332 and 1.160 by Tuesday afternoon.
For the remainder of the week, both pairs traded mostly within a lower range compared with previous weeks as investors monitored geopolitical developments and their potential impact on global trade and energy markets.
- Market outlook
While major supply-side news from coffee-producing countries remained limited during the week, traders continue to monitor shipping disruptions, weather conditions at origin, export flows, and currency movements. These factors are expected to remain key drivers of short-term price movements in global coffee markets.
