The price of Arabica coffee dipped to a four-month low of 123 US cents per pound in the week beginning 16 October before recovering slightly.
Selling pressure was generated by a firmer US dollar brought about by new US Fed rate hike speculations.
However, Commerzbank Research said that this alone did not explain the price weakness. “After all, the USD-BRL exchange rate is still well below its mid-May to mid-July level, which is the last time the coffee price was this low,” said Commerzbank. “The reports of ongoing supply deficits on the global coffee market do not tally with the price trend, either.
“Apparently market participants do not believe these appraisals – something that is also evident from the positioning of speculative financial investors, the majority of whom have been betting on falling prices for the past six months. Net short positions have even been expanded noticeably in recent weeks.
“The last time they were higher than they are now was in early July. Doubts about the tightness of supply are certainly justified, at least as far as Arabica coffee is concerned.”