Arabica Coffee Prices Tumble on Heavy Volume

Arabica coffee prices closed Thursday at a 10-month low, but this did not end the selling. On Friday, at last check, arabica futures were down 2% at $1.319 with technical selling pressures continuing to cause downside.

It was a volatile week for arabica prices, which hit a four-week high earlier in the week before their collapse to a multi-month low. Volumes surged this week. Earlier in the week arabica futures for July delivery (the second position) peaked at a four-week high of $1.4555 per lb. But then downside hit, and it accelerated as automatic sell orders were triggered ahead of the spot contract’s first notice day on Thursday.

While technical factors caused the sell-off this week, when it comes to arabica fundamentals are also contributing to overall pressure. With a large upcoming crop from Brazil after the past crop showed a rebound after years of drought; the supply situation provides cause for more pressure. Data released this week from the Green Coffee Association showed that U.S. green coffee stocks in March rose to their highest level since at least 2001. There have already been reports of relatively high levels of coffee stocks in Europe and Japan, according to I&M Smith. The firm noted that give market participants are pricing in a “best case” scenario for arabica supplies – that upside is possible if any weather issues impact yields.

While arabica futures experienced a big sell-off this week, robusta futures experienced consistent upside. The robusta market is being supported by low supplies after droughts across many major producers impacted crop yields.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.