Coffee price prediction: a retest of highest level YTD is underway

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Aug 31, 2021
  • Key Arabica-growing regions in Brazil continue to experience dry conditions.
  • Pandemic lockdowns in Vietnam, the leading exporter of Robusta coffee, has further boosted prices.
  • The benchmark for Arabica coffee, Coffee C futures contract hit August's high earlier on Tuesday.

Coffee price hit August’s high on Tuesday before pulling back. Weather woes in Brazil and Colombia have largely impacted the soft commodity. At the same time, Robusta prices have surged as a result of the exportation challenges triggered by the pandemic lockdowns in Vietnam.  

coffee price
coffee price

Weather woes

Coffee price is rallying as a reaction to the ongoing weather woes in Brazil. Over the weekend, Mato Grosso do Sul and other parts in Brazil’s central zone received substantial rainfall that brought some relief from the dry season.

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Nonetheless, the key coffee-growing areas of Minas Gerais and Sao Paulo continue to experience drought conditions. Somar Meteorologia has predicted a continuation of the dry weather, coupled with high temperatures, in the region over the next two weeks.

In Colombia, the second-largest exporter of the Arabica variety, cloudiness continues to affect the current crop. A look at the prevailing conditions in the two key exporters of Arabica coffee indicate that the market will continue to be weather-driven in the next couple of weeks. In Vietnam, the leading exporter of the Robusta variety, coronavirus lockdowns have negatively impacted exportation.

Coffee price technical outlook

Coffee price has pulled back after hitting August’s high earlier on Tuesday. The global benchmark for Arabica coffee, Coffee C future contract, was down by 1.38% at 197.10 at the time of writing. Since the beginning of August, it has surged by about 15.64%.

On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages with an RSI of 68. On Monday, it entered the overbought territory with an RSI of 74. This triggered a pullback, even as it remains on its uptrend.

 Based on both the fundamentals and technical, I expect coffee price to record further gains. In the near term, it will likely hover around the psychological level of 200. It may ease further to along the 25-day EMA at 189.75 before bouncing back to the resistance level at 200.

On the upside, the bulls will be eyeing the highest level year-to-date at 215.60. However, it may record some price swings prior to hitting that target. A move below 189.75 will invalidate this thesis.

coffee price
coffee price
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