2:56 PM · 18 February 2021

BREAKING: Coffee price rises for third day in a row

COFFEE
Commodities
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Arabica coffee prices have been rising for the 3rd day in a row, hitting the upper limit of tte short-term consolidation which started in December. As one can see, the behavior of the Brazilian real does not support coffee prices. Nevertheless, it is worth noting that we are observing a global increase of commodity prices, which is also related to the expectation of a weaker dollar and rising inflation.

From the beginning of the year, coffee prices have remained at a high level, which is related to the expectation of smaller harvests in Brazil and the reduction of exports from the key production countries of Central America, famous for high-quality coffee - Honduras and Guatemala. Nevertheless, it's important to remember that in 2020 we saw huge production in Brazil, despite concerns over the coronavirus and a contraction in demand. The tremendous increase in production from Brazil last year led to a rise in coffee inventories on the stock markets (on the other hand, coffee inventories from Central America fell sharply).

We can see that in most cases the higher level of coffee inventories on the stock exchanges (yellow line, reverse axis) led to price drops. A further strong increase may limit the upside potential, even in the event of a strengthening of the Brazilian real or a rebound in demand as restaurants and cafes open in North America and Europe. Source: Bloomberg
Coffee price is approaching the upper limit of short-term consolidation. Even if breakout occurs, buyers will need to deal with a very strong supply zone marked with local highs from previous years. Source: xStation5
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