Arabica Futures Fall on Strong US Dollar

By: Alexis Rubinstein, Managing Editor - Coffee Network

Tue, 23 May 2023, 16:15

Alexis Rubinstein

Managing Editor

CoffeeNetwork - Arabica prices on the InterContinental Exchange are trading 1.65 lower based on the July contract, last seen at 187.55. Volume is heavy, with 14,501 contracts at the time of writing.

Arabica futures were last seen lower, extending losses and a strong US dollar puts pressure on most commodity markets today. Reports of a good pace of harvesting in Brazil are also bearish for the market as ample supplies are expected amid rising production globally and slowed demand. This sentiment has thus far been confirmed through the USDA attache reports. While the major producers of Vietnam and Brazil have yet to come out, the majority of the reports so far show an increase in production, with the exception of India and Indonesia, where both crops were impacted by adverse weather. The only real anomaly was in Mexico, where production was basically flat but exports are forecast 5% lower. This is attributed to slightly higher internal consumption. This slight increase is due to population growth, but the rate of increase is lower than the population growth due to Mexico’s higher-than-normal food inflation. CoffeeNetwork will release their first official forecast for global supply and demand in the coming weeks, followed by the release of the USDA World Coffee Report on June 22^nd.

Robusta coffee futures touched a 15-year high today on continued expectation of a tightness in supplies. While demand for the Arabica market has been thought to be on a downtrend, roasters have turned to the more affordable option of Robusta coffee. Vietnam’s old crop has been mostly sold, so the timely arrival of Brazil’s crop will be necessary to keep the market supplied.

Commodities are mostly lower today as the US dollar hit a two-month high on rising rate bets. The S&P Global US Services PMI increased to 55.1 in May 2023, up from 53.6 the month before. The S&P Global US Composite PMI rose to 54.5 in May 2023 and The S&P Global Flash US Manufacturing PMI declined to 48.5 in May of 2023 from 50.2 in April, well below forecasts of 50, preliminary estimates showed.

Brent Crude Oil rose 1.72 % to 77.30 and Spot Gold Futures ticked 0.18% lower to 1,968.33.

The Dow Jones Industrial Average was unchanged at 33,283.97 and the Stoxx Europe 600 Index was last seen at 466.1, down 0.6%.

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