Coffee futures have interrupted their three-session losing streak today, declining by more than 4%. In recent days, coffee prices had been rising due to concerns over declining production in Brazil, where persistent drought is exacerbating fears about future harvests. Besides a gradual shift in weather forecasts, updated and significantly higher crop projections in Uganda are also contributing to the price decline. Additionally, coffee prices are falling as Brazilian traders Atlantica and Cafebras have filed for bankruptcy protection.
- The collapse of major coffee traders like Cafebras and Atlantica may be exerting downward pressure on prices for several reasons, including the potential liquidation of inventories to repay debts, which increases supply, and the forced closing of long positions used to hedge deliveries.
- Weather forecasts predicting gradually increasing rainfall next week could further limit price gains—unless forecasts change or rainfall proves insufficient. According to World Weather Service, periodic light showers and thunderstorms have been observed in coffee-growing regions in recent days. However, dry soil conditions remain the dominant trend, although temperatures have not been excessively high.
- Meanwhile, weather maps indicate that over the past 18 hours, the key coffee-growing region of Minas Gerais has received little to no rain. Additionally, soil moisture levels in the southern part of the region have dropped to their lowest point in seven years.
- On the other hand, Uganda—while a smaller coffee exporter compared to Brazil—expects total exports to reach 8.2 million bags this year, according to government data. This figure is significantly higher than the 6.9 million bags estimated by the USDA in September last year, translating into an additional 86,000 tons of unexpected supply entering the market.
COFFEE (H1 Interval)
The price decline has slowed around the 23.6% Fibonacci retracement level of the recent upward impulse, while RSI and MACD indicators signal bearish dominance. According to Sucden Financial, technical indicators suggest the market is overheating following the latest gains. Additionally, the decline in the number of active contracts in the options market may contribute to increased price volatility due to reduced liquidity.
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