Coffee Prices Crash to Lowest Level Since June — Supply Fears Ease as Traders Celebrate

Coffee Falls to Lowest Price Since June 

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Coffee prices are smiling back at consumers and coffee lovers. Coffee futures on global markets have again sold off and prices fell to their lowest since June as fears of a supply crunch eased.

Both of the big coffee contracts have been falling recently. December arabica futures fell more than 4% yesterday and November robusta also fell. Traders say that’s because expectations are building that global supplies could improve — so some of the pressure that had pushed prices sharply higher has eased off.

Congrats everyone, we did it! 

Coffee has been very volatile in the past few days. Weather disruption, production problems and low inventories had all helped support prices but traders are now looking more at prospects for better production in main growing regions.

Brazil is still a big story for global coffee markets — Brazilian crop expectations have been the main weakness driver lately (traders and analysts are starting to think about supply surplus next year if production turns out better than expected then that will put pressure on prices).

Colombia is another one to watch. News came out this morning that Colombian coffee production had started picking up again after months of decline. If output from the big producers picks up then more will enter international markets and worries about availability go away.

But that doesn’t mean coffee prices will keep falling. Certified inventories are low; weather in producing countries is unknown too; traders are watching too for effects of changing weather patterns (strong El Niño included).

The big question for consumers is whether this fall in international coffee futures will soon translate into cheaper coffee at supermarkets, cafes and restaurants. No. Retail prices of coffee can be high even when commodity prices are falling because roasters and retailers have to pay transport costs as well as processing labour costs, packaging labour costs and energy costs too.

But sustained fall in green coffee prices will ease some pain too in supply chain. If production picks up and inventories recover roasters will have more room to source beans cheaper.

The recent drop is therefore a mood change. For so many years supply fears were headlines traders now ask if coffee market is on its way to become more balanced supply-demand wise.

That’s good news for coffee drinkers everywhere.

Coffee prices down. Supply fears easing. Wallets breathing again a little.

But whether this is the start of a long downtrend or just another correction in a very volatile commodity market will depend on production, inventories and weather over the next few months.

For now, though:

Coffee lovers: Congrats everyone, we did it!