July brought continued challenges to the Coffee futures market, with roasters facing extreme price volatility as they have become accustomed to. In our commitment to keeping you informed, we provide monthly market commentary to help you make informed purchasing decisions.
Throughout July, coffee prices remained highly volatile, with factors like importing costs, freight, and financing contributing to the elevated prices. On July 1st, prices reached a high of $2.3605, but within two weeks, they declined sharply, hitting a low of $1.9460 on July 15.
During this market dip, coffee roasters showed keen interest as prices slightly improved, although the relief was short-lived. For the first time in ten months, the market basis went below $2.00, breaking a 30+ year record of consistently staying above this level.
While coffee prices are affected by supply and demand fundamentals driven by roasters, farmers, importers, and exporters, they are also influenced by commodity funds and speculators who trade for non-fundamental reasons. These short-term market participants contributed to the recent 40-cent selloff, which affected not only coffee but also other commodities and financial markets. As a result of these factors, coffee prices have rebounded and are currently trading around $2.14.
Apart from speculation, supply and demand fundamentals play a crucial role in the coffee market. Recent data has been conflicting, with Brazil reporting improved coffee exports in June compared to the previous year and the five-year average. However, there has been a continued decline in the number of “ICE Certified” coffee in warehouses, reaching a 22-year low on July 19. This decline has led some low-quality institutional roasters in Europe to seek cheaper alternatives.
Looking ahead, positive export numbers from Brazil in June raise hopes for continued improvement in July and August. If this trend persists, it could alleviate short-term supply tightness and exert downward pressure on coffee prices. While we don’t anticipate a significant decline, we stand prepared for any market fluctuations with a supply of new crop, high-quality coffees ready for roasting.