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NY Arabica breeches USc 200/Ib resistance to reach seven-year high

November 8, 2021

1 mins read

The weekly average price of Arabica coffee at the International Commodity Exchange (ICE) New York (NY) (three-months ahead) broke through the USc 200/Ib resistance level on 13th October 2021 for the first time since October 2014. The seven-year high benchmark price reflected ongoing market concerns related to poor weather in Brazil, the world’s largest Arabica supplier, which the industry has coined ‘drost’, related to the combination of drought and frosts on Arabica plantings and yields.

The Brazilian ‘Arabica belt’ suffered pervasive droughts during Q3 2020 and Q4 2020, which was the crucial development stage of the 2021/22 biennial ‘off year’ smaller crop that was harvested through Q3 2021. This supply-side risk was compounded by the presence of heavy frosts and limited rainfall during Q3 2021, which poses a strong threat to the 2022/23 ‘on year’ crop and could keep the market in a trade deficit for two consecutive years.

These climactic factors provided strong levels of price support in October, where the ICE NY benchmark trended above USc 200/Ib for most of the month. However, an improving weather outlook, attributed to late-October rains, appear to have eased some of these supply pressures, which may be reflected in the November 2021 ICE NY price. While heavy rainfall and improving soil moisture are helping trees to flower, bullish observers believe that the effects of the previous inclement weather have caused irreversible stress to the tree roots which are unlikely to recover for at least two-years. Thus, high Arabica prices could continue to play out for the next year, particularly if global demand peaks, as economies recover from the pandemic.

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Topics: Beverages
Ibi Idoniboye
Ibi Idoniboye

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