Coffee futures settled the Tuesday trading session relatively flat as investors weigh potential supply disruptions in Brazil. After refusing to shut down the South American nation, Brazil is now seeing a dramatic surge in coronavirus cases, creating a lot of uncertainty for the economy. Will its commodities sector get hammered in the process?
July coffee futures dipped $0.005, or 0.05%, to $1.073 per pound at 17:29 GMT on Tuesday on the US ICE Futures exchange. After topping $1.30 at the end of March, prices have been sliding to as low as $1.05. Although coffee had been one of the best-performing crops during March Madness, prices are down more than 16% year-to-date.
Brazil has dominated the coffee market this month over a weakening currency and the rising level of confirmed COVID-19 cases.
The Brazilian real reached another record low against the US dollar this week, hitting 5.8748. The real has been the worst-performing currency among emerging markets as the economy is believed to be in freefall over its handling of the coronavirus pandemic. President Jair Bolsonaro has largely left things as they were, though state governors and mayors have been the ones to implement stringent measures and guidelines aimed at preventing further fallout from the outbreak.
To date, Brazil has more than 172,000 confirmed cases and nearly 12,000 deaths. The government is now reporting daily cases of at least 5,000, peaking at just short of 11,000 last week.
Should the virus continue to affect Brazil, coffee producers will either need to suspend operations or risk seeing their employees spread the highly infectious respiratory illness. This would harm output levels. Analysts say that farmers might speed up picking coffee beans to ensure they meet delivery later this month.
Another huge factor for Brazil is that travel bans throughout the continent have impacted shipments and deliveries.
What makes matters worse for producers is that weather conditions are perfect for coffee growing, forcing plantations to potentially missing out on stellar crops. This might force them to risk spreading and grow and pick Arabica and Robusta beans.
In other agricultural commodities, June corn futures tacked on $0.0375, or 1.18%, to $3.2225 per pound. July soybean futures trimmed $0.025, or 0.29%, to $8.525 a bushel. July wheat futures fell $0.03, or 0.58%, to $5.1425 per bushel.