After two weeks of extraordinarily strong trading that pushed up the prices of coffee futures by over 20 percent, coffee finally reversed course this morning. The benchmark Coffee C Arabica futures for September delivery declined .8 cents to $1.60 per pound, the first decrease in the 3 trading sessions according to Bloomberg.
Trading remains somewhat volatile on Tuesday, with prices swinging between $1.58 and $1.62 per pound of Arabica beans, and looked to end down a tenth of a percent.
A succession of fears about depleted stocks and possible supply shocks sustained coffee’s momentum over previous sessions, so it isn’t surprising that some pessimism about the price level set in today. Goldman Sachs said that production in Brazil should increase in the next year, stating that they “expect the market to remain focused on the Brazilian harvest that started in May and will peak in July/August.”
However, the bank’s research note did not take into account any possible effects from the catastrophic flooding currently afflicting the north-eastern region of the country.
Last week, similarly disastrous rains in Uganda pushed prices higher, as the East African nation announced it would have significant difficulties harvesting, drying and transporting its beans. The International Coffee organization’s projections for demand, on the other hand, show steadily increasing coffee consumption in most major markets.
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