Coffee prices have returned to November levels

Arabica coffee futures were last so cheap seven weeks ago. Experts attribute the decline in prices to an increase in the volume of supplies
It is profitable for Brazilian producers to sell goods such as coffee on international markets for dollars, because the local currency is rapidly depreciating.

Given that Brazil is considered the world’s largest producer of first-class coffee, the increase in supplies in this region affects prices. Meanwhile, the countries of Central America have harvested a good harvest. Honduras, the main supplier of coffee in this region, increased exports last month. These events will help calm the panic that drove prices up by 76% in 2021.

Prices are falling, and buyers are waiting for a favorable moment.

“Roasters have taken a break, hoping that prices will drop to $2 per pound,” said Jorge Cuevas, director of Sustainable Harvest, an Oregon-based importer. “Now everything depends on the Brazilian harvest in 2022.”

Cuevas added that the market will remain highly volatile, given the weather factors and uncertainty associated with the omicron Covid strain.

The March coffee contract fell 2.5% to $2,2055 per pound on ICE Futures, which is the minimum for the most active contract since mid-November. The premium relative to the May contract is narrowing, which means that traders are in no hurry to get their coffee as soon as possible.

Last year, coffee prices rose sharply: production in Brazil fell due to drought, and frosts threatened the harvest next season.

Production problems threaten the largest shortage of coffee in history: the volume will leave the market, equal to the annual supply of Colombia, the second largest producer of Arabica. Increased freight rates against the background of a shortage of ships and containers, as well as shipment delays, reduced margins throughout the industry.

During the annual rebalancing of commodity indices, which will take place during the standard January index change, a net sale of Arabica futures is expected.

Prices for other soft raw materials, including sugar and cocoa, are declining. Cotton is getting more expensive.