Arabica coffee has spent the past six months drifting lower after reaching an 11-year high back in February. In the months leading up to the peak at $2.60 per pound, the price had more than doubled with adverse weather in Brazil raising concerns about production. In the months that followed, however, the focus switched to the risk of a global economic slowdown, and with that the prospect of softer demand for the more expensive high quality bean.
After finding support at a key level below $2/lb the December futures has risen steadily in recent days with the situation in Brazil once again attracting some attention. This recent article from Bloomberg, titled “World’s Top Coffee Crop Shrinks in a Market Thirsty for Supply” confirms months of worries about supply with Brazil’s Conab now expecting the current on-season crop to be the lowest since 2014. Even their estimate of 35.7 million 60 kilogram bags, may end up being too optimistic according to commentators.
As Bloomberg reports: “Brazil’s drought and cold curbed flowering last season and severe frosts in July 2021 led farmers to cut down coffee trees at a time of high costs for agricultural inputs, notably fertilizer”. In addition, Columbia another top producer has seen its crop being reduced by too much rainfall.