Lack of Rain in Tropics May be Support for Coffee Futures

Coffee futures ended the day lower despite news from the Int’l Coffee Organization regarding lack of rain in both Brazil’s & Vietnam’s growing areas and even exports coming to a multi-year low. Coffee futures – despite bullish news – ended the day .047 cents lower trading at $1.24 per pound at the Intercontinental Exchange.

Supply expectations because of lack of rainfall in Vietnam ( the world’s top coffee producing country) and in Brazil’s premier growing region should lend support to robusta prices in the near future. The organization went on to say that, in Vietnam, coffee exports could drop to as low as 1M tons this year – export amounts not seen since 2008 according to Vietnam customs data.

Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, shared his fundamental view of the coffee futures market by stating,There is increasing alarming concern for robusta coffee supplies due to lack of rainfall.” Craney adds,What coffee beans are coming out of Brazil’s next biggest region of coffee growing are said to be 10%-15% smaller than normal.”

The trend for coffee futures is at a crossroads…after finding lows in January an early uptrend emerged, however the rally came to an abrupt halt late last month and has not seen the needed followthrough to sustain the rally. Coffee futures remain in consumer favorable prices relative to the multi-year lows coffee prices are now.

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