Coffee Finishes Above $1 As Bean Poised for Worst Quarter Since 2015

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Coffee futures settled the Monday trading session above $1, despite wiping out all its gains to start the trading week. Coffee prices will suffer their worst quarter in five years as ballooning global supplie, and diminished demand weighed on the agricultural commodity. With social distancing guidelines, fears of a second wave of the coronavirus, and adjusted consumer behaviors, could coffee slump even more.

September coffee futures dipped $0.005, or 0.05%, to $1.005 at 17:29 GMT on Monday on the US ICE Futures exchange. Coffee prices had topped $1.025 in intraday trading before erasing all its gains. While coffee prices jumped more than 2% over the last week, they are still down 23% year-to-date.

But the real story for coffee is that it is headed for its largest three-month loss since 2015. Coffee futures have cratered 16% in the second quarter, driven by slumping consumption and increasing global supplies. With prices forecast to fall for the rest of the year, money managers have increased their bearish stance and raised their net-short positions to seven-month highs.

Although the coffee market has found some support from Amazon’s reported spike in coffee sales and Brazil selling 60% of its 2020 harvest, it might not be enough to keep prices above the $1 threshold for the rest of the year.

Last week, Rabobank projected that global coffee demand would decline by 0.8% to 164.1 million 60kg bags this year, primarily due to a substantial drop in out-of-home coffee drinking. It also cited social distancing guidelines, lockdowns, and a jump in unemployment as reasons for lackluster demand.

At the same time, the US Department of Agriculture (USDA) forecast that world coffee output would surge to a six-year high of 176.1 million bags in the 2020-2021 marketing season. The USDA also projected that global ending stocks would soar to a six-year high as production outpaces buying.

Some analysts are keeping an eye on the Brazilian real, which has been the worst-performing currency in forex markets. With a depreciating real and lower coffee prices, importers might be flooding Brazil with orders, which would incentivize farmers to boost production efforts. This would continue to add to the international supply glut and apply downward pressure on prices.

In other agricultural commodities, August corn futures picked up $0.0875, or 2.74%, to $3.28 per pound. August wheat futures soared $0.105, or 2.21%, to $4.8625 a bushel. August soybean futures were unchanged at $8.6125 per bushel.

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