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Market Update 3rd March '23


Coffee prices remained at 4-month highs for arabica and 5-months highs for Robusta despite arabica losing some steam to close down 4% and Robusta trading relatively flat across the week, by market close on Thursday in New York and London respectively.


Arabica prices found some relief over the course of the week, falling a little under 4% to close at 183.95 USC/lb overnight in New York. Traders taking profit on long positions drove the decline after news emerged from Brazil last week that flood concerns were beginning to ease after heavy rains in arabica growing regions. An easing of adverse weather conditions should allow farmers back into fields to apply fertilisers and pesticides. Prices were also pressured due to news of increased exports from Honduras and positive forecasts for the Colombia harvest.

Robusta prices for the RMK23 May contract fell briefly at the start of the week in London, as traders taking profits on long positions exited the market. Prices were then initially held within a relatively flat trading band with strong selling from India providing resistance on a price rally in response to the new low. Prices recovered on the back of traders swapping from arabica to Robusta contracts to post a 5-month high, settling at $2,180 USD/t overnight in London.


Arabica prices are finding support in the fundamentals with global inventories continuing to tighten and smaller coffee exports from producing countries. Estimates on 2022/23 coffee production continue to be cut by reporting entities such as the USDA (United States Department of Agriculture), although all reports still predict a modest surplus. Technical indicators are still showing the market is trending to overbought sentiments however and pricing continues to test the next support level around the 180.00 USC/lb. A fall below this level could suggest the possibility of a continued downward trend.


Robusta prices are technically still trending towards the overbought region, but prices are being supported by reduced supply from Vietnam and the forecast record deficit of nearly 6 million bags due to crop damage in Indonesia. Traders switching from arabica to Robusta contracts are also providing support to prices.

 

The information contained in this blog is intended to be general in nature and should not be taken as constituting professional financial advice. It does not take into account your objectives, financial situation or needs. We recommend seeking independent financial advice before acting on any of the information contained within.

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