Coffee getting stuck in the filter

11 Oct 2022 | 2 min read

With coffee prices reaching highs that have previously been rare, the market is at an impasse.

With the Fed meeting at the beginning of November, the more current possible catalysts and triggers are related to the climate. More precisely, the environment around the prominent crop fields of Brazil and Colombia. Since Friday, heavy weather and precipitation have been experienced in parts of the province of Minas Gerais in Brazil, where much of Arabica coffee is grown. This weather is in line with other forecasts of the coming South American winter, with heavy rainfall anticipated in both parts of Brazil but mainly Colombia, the latter starting main crop harvesting now in October through to the new year.

Precipitation forecast 2022

Source: Accuweather.

Worth noting is that Arabica is the most-grown coffee in the world. It is mainly produced in Brazil and Colombia, but there are others. Most notable is the Robusta bean, mainly produced by Asian countries close to the Pacific Sea, such as Vietnam and Indonesia. While Arabica is the bean of choice for the United States, Robusta has more European sales.

Storms and hurricanes have threatened to destroy crops and hurt production in Brazil and Colombia. Still, with forecasts looking wet and prices near all-time highs, it appears reasonable that supply will surpass demand, pushing coffee prices back toward lower levels in the past five years.

Coffee “C” futures (USD per ounce), daily one-year price chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

Coffee “C” futures (USD per ounce), weekly five-year share price chart

Source: Barchart. Note: Past performance is not a reliable indicator of future results.

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence


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