Any thoughts
Going to hit bottom some time, but not there yet. 2013 bottom? could go alot farther because of the $ strength. Need to let this one prove the bottom before going long.
Sentiment numbers are the worst in 30 years (deservedly so).
I remember coffee trading around 50c for awhile back in the early 90's...........before the massive freeze events in 1994.
Recent prices are down BELOW the 10 year lows:
Coffee charts going back 10 years:
The last 7 days:
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Coffee, 5 year chart below............cutworm, we are below the 5 year lows!
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Drought in Brazil in 2014 caused a spike
Drought in Brazil and bad weather globally in 2010 caused the 2011 spike
Current price below the 10 year lows.
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As you probably know, the dry season for coffee country in Brazil often continues well into September. For those that are not aware of where the main growing areas are:
This is where they grow coffee in Brazil.....the worlds biggest producer.
The higher the number below, the greater the production. 1=highest.
Looking at the global picture of coffee production below:
It's always dry in coffee country at this time of year and a month away from when rains often kick off their rainy season.
Here is the global rainfall compared to average over the last 6 months. Been pretty dry in many locations of South America.
http://www.cpc.ncep.noaa.gov/products/Precip_Monitoring/Figures/global/n.180day.figb.gif
The maps below are for the past 90 days and 30 days rainfall:
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Here is the latest seasonal forecast for precipitation for the upcoming 3 month. Looks a bit dry for coffee to start the rainy season.
Ideally they should start getting some rains by early October to trigger the first set of flowering.
Here is a list of historic weather events from frost/freezes and droughts thru 2000.
We had a couple of major droughts after that though.......2014 was the big one.
The coffee growing region shifted much closer to the equator around 3 decades ago to lessen the risk of cold and since then, mainly the 1994 freezes did major damage. Global warming has also helped too.
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| Coffee Frost and Drought History
* In most cases frost or drought was not indicated by the source. Although only F is written in these cases it is likely a combination of the two forces that caused a devastating coffee crop. |
Coffee used to rally in May, dialing in risk premium for a potential frost/freeze but the last severe one(s) were in 1994 because they moved the coffee plantations farther north, closer to the equator after devastating freezes in the previous decades in far Southern Brazil.
Global warming has helped out a bit too.
The coffee crop is harvested at this time of year(their Winter, our Summer) so there is harvest pressure as well as frost risk premium(especially in the past-when freezes were more of a threat) coming out of prices which often pressures coffee prices lower at this time of year.
Note the historical spike low during the current time frame mid/late August:
