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Coffee caps worst week in 22 years on overflowing bean glut
[NEW YORK] The world is overflowing with coffee beans, sending futures for the arabica variety to the worst weekly slump since 1998.
The glut is so bad that warehouses in Brazil, the world's biggest grower and exporter, have never been this full. Trucks in the country's coffee heartland are waiting days to unload cargo collected from a record crop.
Prices in New York, the global benchmark, tumbled 14 per cent this week.
Supplies are piling up just as demand remains weak.
Arabica coffee is the smoother variety preferred by roasters like Starbucks. With consumers still proving reluctant to head back to cafes and restaurants in droves, consumption for the premium beans is tepid.
By contrast, robusta beans, used in instant coffee and at-home blends, are holding up a bit better.
Robusta futures in London are down less than 2 per cent this year, while arabica has tumbled 12 per cent.
The arabica collapse comes after prices rose in the previous three months. Dry weather in Brazil had sparked concerns over the next harvest, but since then the coffee belt has seen some showers, alleviating the threat.
"Prices fell owing to forecasts of rain in key growing regions" in the South American nation, which should boost yields, Caroline Bain, chief commodities economist at Capital Economics in London, said in a report.
Meanwhile, there are have been some rare deliveries of Brazilian beans to warehouses approved by ICE Futures US. That could signal that suppliers in the nation are still holding a big chunk of the 2020 crop.
On Friday, arabica futures for December delivery dropped 3.8 per cent to US$1.135 a pound in New York. Prices fell for a fifth straight day.
Coffee settled below the 50-day moving average and approached the 200-day measure, typically seen as bearish signals by some traders.