**Coffee Prices Drop Amid Market Volatility**
On Friday, September arabica coffee (KCU26) closed down by 3.92%, falling -13.65 cents, while September ICE robusta coffee (RMU26) decreased by 4.72%, down -191 cents. This decline follows a week of extreme price fluctuations triggered by the Intercontinental Exchange’s two increases in margin requirements for trading coffee futures, resulting in reduced liquidity and forced commodity funds to close positions.
As of July 1, Brazil’s coffee harvest is only 52% complete, lagging behind last year’s 60% and the five-year average of 55%, according to Safras & Mercado. The U.S. Climate Prediction Center also reported that a significant El Niño weather pattern has emerged, likely to impact coffee production adversely in Brazil and potentially Asia due to expected extreme weather events. Current ICE arabica coffee inventories fell to a 2.25-year low of 344,269 bags, while robusta inventories rose to a 3.5-month high of 4,200 lots after hitting a two-year low of 3,631 lots in May.
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