Coffee Prices At 6-Year High As Extreme Cold Weather Hits Brazil

By Margaret Yang of DailyFX

Monday, July 26, 2021 9:25 AM EDT

Arabica coffee futures advanced to the highest level seen in more than six years
Analysts forecast a significant draw in coffee inventories as supply falls this and next year
The freeze was the most widespread and severe in more than 25 years

Coffee Beans, Coffee Cup, Cup, Coffee, Benefit From

Image Source: Pixabay

Coffee C Futures Traded in ICE – Day Chart

Coffee Prices at 6-Year High as Extreme Cold Weather Hits Brazil

Chart by TradingView

Coffee C futures contracts – the world’s benchmark for Arabica coffee – surged to the highest level seen since December 2014. This happened after extremely cold weather hit Brazil’s major coffee fields. Temperatures in south Minas Gerais – the country’s most productive region - fell below zero degrees Celsius, causing frost and freeze. This may severely impact coffee plants’ yield for this and next year. The usual average temperature at this time of the year in the region is around 20 degrees Celsius.

Brazil is the world’s top coffee exporter, contributing around 16% of the world’s coffee shipments during 2020 (chart below). Its major importers include the US (18.4%), Germany (16.8%), Italy (10%), and Japan (+7.7%). Arabica accounts for 70% of its total production, and Robusta accounts for the remaining 30%.

Weather forecasts suggest that unusual weather conditions could persist until the end of this month, paving the way for prices to aim at higher levels should the market anticipate wider damage. Technically, 200 may serve as a psychological resistance, breaching which may open the door for further gains toward 225 – 2014 high.