Arabica coffee futures on ICE collapsed on Tuesday, as a global surplus dragged the second month to its lowest levels in over 13 years.
Coffee futures dropped to the lowest since 2006 in New York as a global oversupply weighs on the market.
May arabica coffee settled down 1.2 cents, or 1.2 percent, at 96 cents per lb, after trading as low as 94.65 cents, the lowest for the second month since December 2005.
“Supply will react at some point, but in the short term, prices might go down a little further,” said Michaela Kuhl, an analyst Commerzbank AG.
In Brazil, years of high local prices allowed farmers to invest more, leading to better yields, while favorable weather helped boost production. The country will produce 57.6 million bags of coffee in the 2019-20 season, which is more than initially expected, according to Rabobank International.
Dealers were watching support at the recent front month lows of 93.55, touched in February, and 92 cents, last seen in September.
Coffee prices have been squeezed by excess global supplies, especially from top grower Brazil.
“It’s a total blowout in the coffee market today,” said one U.S. trader. “With all of these surpluses, it’s going to be hard for coffee to do anything to the upside.”
Though a small deficit is expected in 2019-2020, many market participants are already anticipating record-large output in 2020/2021, the next on-year in the Brazilian production cycle. This could make the upcoming deficit an irrelevant market factor, said Rodrigo Costa, director of trading at Comexim USA.
Total open interest climbed on Monday to 320,063 lots, a five-month high, ICE data show. This could indicate new shorts in the market, dealers said.
With prices this low, producer selling should start to dry up soon, said Steve Platt, futures strategist at Archer Financial Services. Prices could start impacting yields as farmers struggle to afford adequate inputs, he said.
May robusta coffee settled down $7, or 0.5 percent, at $1,525 per tonne.