MILAN – Coffee futures prices in New York dropped sharply on Friday: the benchmark contract for July delivery closed down 565 points to a 5-week low of 106.75 cents, 9.2% lower from the previous Friday close. Coffee futures in London fell $15 to end the week at $1,098 after touching their lowest levels since 2008 on Wednesday.
In New York, profit taking was triggered by a slump of the real against the dollar. The Brazilian currency fell by 3.37% against the greenback to a new record low of 5.7456 reals/USD. A weaker real encourages export selling by Brazil’s coffee producers.
Prices were also dragged down by expectations of lower global consumption due to the economic crisis caused by Covid-19. Comexim Ltd on Wednesday said they expect global coffee demand to stay flat this year and a global coffee surplus of 8 million bags in 2020/21.
In Brazil, the weather has been reported to remain conducive and many independent forecasters foresee a record breaking harvest to come. The new harvest has already begun in the Conilon robusta areas. Harvesting in the Arabica areas usually picks up pace in June each year.
Vietnam has resumed business and trade on a subdued note subsequent to the Government having eased the country’s lockdown restrictions which have been in place since early April.
Coffee prices still have support on concern about coffee supply disruptions in South America.
Coffee-trader Volcafe recently told clients that the coronavirus pandemic is causing logistical holdups that will become “more widespread” in major coffee-producing countries, which may delay coffee shipments to ports and other transport operations.