Robusta coffee futures climbed to a two-year high Tuesday, amid more supply threats to the upcoming crop in Brazil. Erratic rainfall in Brazil has the potential to hurt the flowering of the upcoming crop. With the robusta market already supported by a supply shortfall, further, expected tightness has given traders reason to bid the commodity up even higher.
Brazil is the world’s second largest robusta coffee grower, and the country’s crop has suffered following two years of drought, and now the latest erratic rainfall could hurt the crop during its key flowering period. The flowering period is crucial because good flowering means high yields of coffee beans. While the upcoming crop is threatened, past dry weather means that there is little of a buffer to help robusta supplies.
Following the two-years of drought, the country’s coffee stocks are so low that Brazilian companies have laid off workers who engaged in the harvest, transport, and processing of the crop because there simply were not enough coffee supplies to require these services. The recent drought is seen as the worst in 80 years. While Brazil is the world’s second largest coffee producer, bad weather has also impacted the robusta crops in top producer Vietnam.
On Tuesday, robusta coffee hit a two-year peak of $2,126 per ton. Futures have pulled back from this apex, and in the after hours session robusta was trading around $2,089 per ton. Even after the recent rally, technical indicators favored more upside. Traders will likely pay close attention to the rains in Brazil. If satisfactory rainfall comes in the following weeks, the commodity will be poised for a correction, but continued concerns over dryness would definitely support upside. Resistance is seen at $2,093, support at $1,991.
While robusta is stealing the show, arabica coffee is also seeing upside. On Tuesday, the commodity climbed just under 1% to reach $1.5850 per lb., its highest price point in about a month. The commodity hit a 19-month high in September.
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