Key point—The maps, below show the heavy rain that has hindered the harvest of Robusta coffee in Vietnam the last month or so. In addition, after a good early start to the coffee bloom in N. Brazil. One can see the drier trend the last few weeks that has caused some concern for the new 2017 crop. I believe, this has been one key factor in the rally in coffee recently.
Also, during the spring and summer, with the Brazil coffee harvest abound, “hedge pressure” from producers pressured Arabica vs. the bull move in Robusta, as there was more than enough High quality coffee around (Arabica). However, this time of the year, there is no harvest pressure out of Brazil. Hence, this makes supplies much tighter with the historic 30% reduction in global Robusta supplies this year, causing commercials and producers to “switch to higher quality” Arabica to full needs. The result===the explosion in prices recently.
Good rains are in the forecast for some areas that have been dry since the summer and fall, especially in NE Brazil—but with an off crop cycle year for Brazil production—it is hard to predict how high coffee prices will go currently. Nevertheless, it is possible that given the increase in Brazil rains shortly, some top in the market might occur in the coming days.
