RNY Market Watch: June 2022 Coffee Supply & Demand

Our coffee traders are back with the latest insights into the “C” market and how coffee supply and demand is affecting prices this month.

Another month passed and coffee prices, as measured by the ICE KCU’22 futures market, continue to be volatile. While prices in early May dropped close to $2.00, June has seen a spike back to $2.4200. This is a level we have not seen since the February sell off back under $2.2000. We’re currently trading around $2.3000, with the July “C” contract coming to an end.

So, why the crazy volatility?

Cecafe reported Brazil May exports were up +5.1% y/y to 2.8 million bags, which may have helped to put some pressure on prices last month. And Vietnam May coffee exports were up +9.3% y/y at 142,329 Metric Tonnes. On the flip side, the Colombian Coffee Federation reported that Colombia’s Jan-May coffee production was down -4% y/y to 4.5 million bags.  Anacafe also reported Guatemalan May coffee exports were down -15.3% y/y to 471,042 bags. These are some examples of fundamental coffee news that can affect coffee prices in the short term. The market reacts, and then the influential commodity funds and large specs aggressively push prices up and down, helping to exacerbate price volatility.

Coffee Supply & Demand

Ultimately, the market should conform to basic supply and demand fundamentals. However, until supply chain challenges subside and the news about Inflation/US economy calms down, the coffee market will be subject to the aggressive volatility seen in all markets these days.  For the coffee market, the biggest influence is the amount of coffee Brazil can provide. As coffee from this current harvest continues to make its way to the world, we may find out soon if coffee prices will stubbornly stay over $2.00/lb. Or perhaps a good harvest pressures prices lower?

Although many financial markets have their own unique supply/demand characteristics, inflation seems to be a major factor in all market dynamics. Coffee is no exception. High energy and labor costs, and a decrease in available labor has certainly helped to keep coffee prices elevated, as coffee producers face these rising costs and need higher prices. So, we wait and try to see what clues the market is giving us.

While we wait…

While we wait, we’re going to drink delicious new crop coffees. June, July and August are the heart of new crop for so many of our favorite origins from Central America to Africa. Ethiopians are rolling in, high-end single Estate Guatemalans and Costa Rica Micro lots are knocking on the door just to name a few. Contact us, we will help you navigate this crazy market and guide you to the right coffees for the right applications.