Coffee futures prices basis the most active May contract rose 14.15 cents over the week to close at USD 3.07/lb, breaking above the USD 3.00/lb level for the first time in the current period.
The move was supported by a combination of factors. Geopolitical tensions related to the Middle East conflict have driven oil prices higher, which in turn has lifted broader commodity markets. For coffee specifically, the analyst notes that the impact of higher fertilizer costs, which follow energy prices, is limited in the near term. Coffee is a tree crop, meaning any reduction in fertilizer application is unlikely to affect yields until the following production season. Additionally, with most origins currently producing profitably, an increase in fertilizer costs is unlikely to reduce usage materially as long as growers continue to generate positive returns.
The more immediate market driver is supply. Brazil continues to hold back coffee from the market at a time when stocks at destination are extremely tight. Even though the new Brazilian crop is maturing well, the tight supply situation is not expected to resolve quickly, which continues to support futures prices.
Looking ahead, the analyst expects prices to test USD 3.20/lb before encountering selling pressure from origins.
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