July 20

7/20 - WEEKLY COMMODITY SUMMARY:

  • The coffee market took a sharp bullish turn over the past month. Last year’s harvest had been plagued by weather-related crop losses in Brazil (Arabica) and Vietnam (Robusta), which tightened global inventories. But with forecasts for a bumper Brazilian crop this year (up 14-to-16% year-over-year) and a global surplus - combined with the cancellation of tariffs - coffee prices had been steadily declining in April and May.

  • Then market sentiment changed as heavy rains slowed the Brazilian harvest and traders began obsessing over the impending El Niño weather threat. With prices starting to trend higher in June, speculators – who had bet on declining coffee prices - were forced to cover their short positions, and it was off to the races. Coffee futures, which were $2.40 in June, have jumped to $3.21 (7/17).

  • Winter threats typically place a “freeze premium” on Brazilian coffee. So, look for seasonally strong prices at least until September.

Sheena Levi