Coffee futures hit the snooze button on their recent rally on Thursday as investors took profits and analysts warn of prices crashing when the economy returns to normal. Coffee has been one of several agricultural commodities to have seen consumer demand stay the same and in some regions balloon. Is there more room for growth, or will prices fall back to 2020 lows?
July coffee futures tumbled $0.0115, or 0.95%, to $1.2005 per pound at 15:51 GMT on the US ICE Futures exchange. Coffee prices have surged 15% over the last month, paring their year-to-date declines of 7%. Over the last 12 months, coffee has surged nearly 30%.
Since the coronavirus pandemic has locked down entire economies and forced people to stay inside, consumers are getting their caffeine fixes at home. Like wheat and orange juice, shoppers have been panic buying coffee as they transitioned from out-of-home purchases to in-home brewing. They are stocking up and filling their cupboards with containers of coffee.
The coffee market has also witnessed a net increase in demand for coffee roasting.
Although supermarkets possess ample supplies of coffee, lockdowns were still affecting the process of getting coffee on grocery store shelves. While everything from picking to packing coffee has been continuing, shipping routes have been disrupted around the world.
The other key factor is the rising US dollar. Despite the Federal Reserve’s intentions to suppress the greenback’s rally, the dollar has climbed against a basket of currencies. The US Dollar Index, which measures the currency against several others, has been trading in the range of 99 and 105. And this trend has kept a lid on soaring consumer prices.
The coffee outlook remains a bit unclear. The 2019-2020 marketing season is in a deficit, but 2020-2021 is a bit uncertain due to consumers clearing out their cupboards and could lift demand levels.
In other agricultural commodity markets, May corn futures rose $0.025, or 0.78%, to $3.2175 per pound. May wheat futures shed $0.06, or 1.11%, to $5.345 a bushel. May soybean futures dropped $0.04, or 0.47%, to $8.4775 per bushel.