The Arabica coffee price made a strong bullish breakout as concerns about supply continued. Data shows that it jumped to a high of $215 on Monday, its highest level since October 2022. It has soared by over 50% from its lowest point in 2023.
Arabica and robusta are soaringRobusta, on the other hand, has soared to a record high of $3,825, which was also much higher than the pandemic low of $1,026. This price action means that these soft commodities are doing better than other traditional assets, including stocks.
Coffee has joined other commodities like cocoa that has gone parabolic in the past few months. Cocoa recently soared to its highest point on record as it outperformed popular stocks like Nvidia.
The main reason for the ongoing Arabica and Robusta price surge is that the industry is going through supply challenges at a time when demand is rising around the world.
Coffee’s supply growth has been slowing around the world as farmers moved to other profitable crops and ventures. In Kenya, many farmers opted to subdivide their plots for real estate projects.
The only bright spot in the Arabica market is Brazil, which is expected to post its third annual increase of coffee production this year. It is the third time that this has happened in over 140 years.
A report published this week showed that arabica exports rose by 6.8% in February to 11.3 million bags.
There are also concerns about the strength of the Brazilian real on Arabica coffee. The Brazilian real was trading at 5 against the US dollar, down by 4.5% from its highest point in September.
Some coffee-producing countries are seeing weather-related events. For example, Vietnam is going through a major heatwave that is having a major impact on crop production. Vietnam is one of the biggest coffee producers in the world.
There are also concerns about El Nino, an event that brings heavy rain in Brazil and dry conditions in India.
Arabica price surge is also a reaction to robusta, which has surged hard in the past few months, as I wrote here.
Arabica coffee price forecast
The daily chart above shows that the price of arabica made a strong bullish breakout last week. This performance happened after it spent a few weeks forming a symmetrical triangle pattern. The pattern also resembled a falling wedge, which is a popular bullish sign.
It also happened after coffee formed a cup and handle pattern, which is a popular sign of continuation. Coffee has remained above the 50-day and 25-day moving averages while momentum indicators are pointing upwards.
Therefore, the outlook for coffee price is extremely bullish, with the next target to watch being at $240, the highest swing in June 2022.
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