Coffee futures have plummeted nearly 6% from last week’s highs since a recent forecast of rain in Brazil’s coffee growing region boosts the prospects for their crops. Coffee futures’ move lower is the biggest drop in prices in more than three weeks during a time when the world’s biggest grower and exporter of coffee beans has been coping with the worst drought in decades.
The drought in Brazil during January and February definitively reduced coffee crop prospects, which caused coffee prices to soar 76% so far this year. In the next week to a week-and-a-half, however, above normal rainfall is expected in the coffee growing areas that need it most.
“The prospects of wet weather are driving coffee prices down and increasing volatility. Any rain is welcome as concerns over Brazil’s coffee crop following the worst drought in decades continue to dominate the market,” stated Matt Zeman, a senior commodity broker at Kingsview in Chicago, regarding the current coffee futures situation.
Coffee futures trend has flip-flopped down from up, and is currently up. The initial margin requirement for coffee futures is just over $8,000 bucks per contract so in order for me to initiate a position I will await a contraction in volatility on a pull-back in prices.
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