In this weekly Commodities Watch column, John T. Barone, president and commodities analyst for Market Vision Inc., offers a snapshot of the state of commodities for restaurants.
With a large Brazilian crop in the ground this year, coffee futures — which started the year at $2.29 — averaged just $1.57 for the month of June. Then, heavy rain in July knocked berries off trees, threatened quality, and drove prices back to $1.89. But dryer weather in August has been ideal for harvest, and prices have fallen to $1.60. So how low can coffee go?
The Brazilian government had encouraged farmers to hold back sales this past spring in order to help support prices ahead of harvest. So the Brazilians are sitting on large supplies. Additionally, the Euro crisis has weakened demand for higher quality Arabica beans.
Coffee futures should test June lows in the $1.50 range in August and September. But look for potentially negative reports on Brazilian crop quality, and U.S. roaster buying in October and November, to put a floor under prices by fall and eventually send them higher again.
Contact John T. Barone at firstname.lastname@example.org.