Coffee prices fell sharply on September 11, 2023, with September arabica coffee (KCU26) down 4.16% to $313.85 per bag and September ICE robusta coffee (RMU26) down 2.97% to $3,783 per ton. The decline follows a 1-week low for arabica, influenced by a reported 14.4% year-over-year increase in Brazil’s green coffee exports to 2.64 million bags.
Last week, coffee futures hit 5.5-month highs before experiencing significant volatility due to illiquid trading conditions. Intercontinental Exchange (ICE) raised margin requirements, prompting many commodity funds to close positions and contributing to excessive price fluctuations. The Commitment of Traders (COT) data indicated that funds increased their long positions in robusta coffee to 44,195 net-long positions, the highest in over two years.
Concerns about an El Niño weather pattern could negatively impact Brazil’s coffee crop in the coming year. The US Climate Prediction Center forecasts the current El Niño could be the strongest in 75 years, which may result in disruptions including floods and droughts that affect coffee production across Asia and South America. Meanwhile, ICE arabica coffee inventories have fallen to a 2.25-year low of 334,289 bags, signaling tightening supply dynamics.
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