Coffee fell 6.7% Tuesday and 21.7% since the start of the year; harvests are poor but exports are high.
Investors in the soft commodity are speculating at present as to whether coffee will reach its support level of around $105 last seen in December 2013 or make a recovery to October 2014 prices of $225.
The deliberation is due to the dilemma of coffee harvests being poor this year in the major producing area of South America and with the International Coffee Organization reporting that ‘world production is expected to come to 142 million bags in crop year 2014/15, 4.6 million less than 2013/14 and its lowest level in three years.’
However, the ICO also note that ‘This puts the coffee market into a deficit for the current year, although stocks in exporting countries have so far allowed exports to continue at a strong pace.’
The ICO comments in its latest press release that ‘Total coffee exports came to 8.8 million bags in January 2015, essentially unchanged on the same month in 2014. This brings total exports for the first four months of the coffee year to 34.4 million bags, just 0.1% less than the same period in 2013/14. Brazil continues to record strong export performance, while higher levels also came out of Colombia and Vietnam.’
Overall estimates for a year on year basis are as follows:
Total production in crop year 2014/15 is now estimated at 142 million bags, 3.2% less than 2013/14.
World coffee production is likely to be some 4.6 million bags lower compared to 2013/14, with both Arabica and Robusta estimated lower, by 2.8% and 3.7% respectively.
Production in South America is estimated 6.8% lower on 62.7 million bags, giving it a 44.1% share of the world total.
Certified stocks on the London futures market have been significantly reconstituted over the last year, from a low of just 270,000 bags in April 2014 to 2.6 million in February 2015.
Certified stocks on the New York market, on the other hand, have been declining gradually over the same time period, from nearly 3 million bags to 2.6 million.
MT4 Chart: Coffee
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