Coffee prices down on dollar strength

Coffee prices this morning are moderately lower. Today’s rally in the dollar index to a 1-1/2 month high sparked long liquidation pressures in coffee futures. Arabica coffee prices slipped back from the previous session’s four-month peak.

May arabica coffee settled down 3.65 cents, or 1.9%, at $1.897 per lb, slipping from the previous session’s four-month high of $1.9415.

Dealers said the market has been underpinned by tightness in the physical market in Brazil and Colombia while exchange stocks decline, but they added it became somewhat overbought after the recent spike.

Brazil’s Trade Ministry data showed coffee exports were falling 45% in February, while broker HedgePoint cut its view for the new crop.

ICE certified arabica stocks fell to 809,566 bags on Thursday after losing more than 80,000 bags in the last two weeks. There were 10,412 bags pending grading.

Domestic coffee prices in Vietnam hovered near a six-month high on Thursday, tracking a surge in global prices.

On Wednesday, coffee prices rallied to 4-1/4 month highs on a lack of coffee for sale in the cash market after reports that Brazilian coffee farmers are withholding supplies for higher prices due to increased growing costs, especially fertilizers.

Signs of tighter coffee inventories are also pushing prices higher.  ICE arabica coffee inventories fell to a 7-week low of 814,966 bags Wednesday.  Also, last Wednesday, the Green Coffee Association reported U.S. Jan green coffee inventories fell -1.8% m/m to 6.265 mln bags.  Finally, robusta coffee inventories are shrinking as ICE-monitored robusta coffee inventories last Wednesday fell to 5,933 lots, the lowest since contract rules changed in 2016.

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