Coffee price prediction: exit 2021 rally, enter 2022 rally

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 Jan 3, 2022
  • Coffee was one of the best-performing commodities in 2021.
  • Coffee price surged by over 80% over a span of one year.
  • It will likely continue on an uptrend despite the expected correction.

Coffee price ended the past year on range-bound trading. It has undoubtedly been one of the best-performing commodities in 2021. Since the beginning of the year, it has surged by over 80%. During a similar timeframe, silver has dropped by 16.20% while copper has risen by 24.44%. in the agricultural sector, soybean, corn, and cocoa have surged by 3.04%, 19.46%, and 0.66% respectively.

In the new year, investors are keen on whether last year’s rallying will continue. Earlier in December, ICE coffee futures hit a 10-year high. A look at the fundamentals shows no signs of a trend reversal. However, the technicals indicate a probable correction.

Fundamentals’ outlook

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One of the factors that have fuelled coffee price rallying in 2021 is the global shipping crisis. The resultant shortage of containers had a direct impact on the commodity. Subsequently, buyers engaged in panic buying; fuelling the months-long uptrend.

Granted, some bottlenecks appear to be easing. However, the crisis will likely persist in the coming months. While investors are increasingly looking past the Omicron coronavirus variant, there are still some uncertainties over its impact on the network of global trade. Labor shortage, shipping backlog, and container shortage will likely sustain the crisis longer.

Besides, the weather conditions in key coffee-producing regions are expected to boost the rally in the new year. Brazil, which is the leading producer of the Arabica variety globally, has experienced adverse weather conditions in the 2021/22 season. Frost and drought have resulted in a deficit of 5.2 million bags in 2021. As such, investors will be keen on the weather patterns in South America in the coming months.  

Coffee price prediction

Coffee price is over 10% below the 10-year high it hit earlier in December. At the time of writing, ICE futures were down by 1.2% at $2.26 per pound.

On a daily chart, it is trading slightly below the 25-day EMA and above the 50-day EMA. It is also above the long-term 200-day EMA. Notably, it has been trading above the 200-day EMA since November 2020 when the uptrend began. Based on these technical indicators, the commodity will likely remain on upward momentum in the coming months.

Nonetheless, the current correction may continue in the short term before returning to the uptrend. From this perspective, the recent high of 2.52 will be a key resistance level. It may trade within a rather tight range with 2.20 as the support zone. A move below that level will likely have the bulls defend the support at the psychologically crucial zone of 2.00. On the upside, additional bullish momentum will place the next target at 2011’s high of 2.72.

coffee price
coffee price
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