Coffee futures prices fell to a 13-year low, but production cuts in Central and South America led to a rebound in prices

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Coffee futures prices have fallen to their lowest level since 2006

With coffee futures prices falling to their lowest level since 2006, there will be more bad news in the coffee market.

The problem stems from global oversupply, largely because Brazil, the world's top coffee producer, reported a record harvest in 2018, with another big harvest expected in 2019, according to Bloomberg. The decline has had a huge impact on Arabica coffee. The article points out that "one of the worst-performing commodities in the past year".

Arabica futures in New York fell 2.6% to 94.65 cents a pound. Prices have fallen by about 20 per cent over the past year, and speculators have suffered a net bearish in about 18 months.

The problem of oversupply is not easy to correct. As the article points out, even countries that work hard to produce will still be hit because Brazil produces so much. For farmers, it is not as simple as switching crops. Coffee trees take years to grow and then produce for years. In order to switch crops, farmers have to cut down coffee trees, making all the work they do to produce trees useless and eliminating any profit opportunities when prices rebound. They're basically trapped.

Prices are expected to rebound. According to Olam International, the world's second-largest coffee supplier, the worst may be coming to an end. Even in the case of surplus, importers expect prices to rise, but unfortunately, the reason is not positive. Oran said the bad weather will have a negative impact on producers in the growing areas of Central and South America, which could in turn lead to a rebound in prices.

The problem that coffee prices can't be cheap won't go away, at least not soon. For their part, SCA is investing in their coffee price crisis response plan to help find ways to propose artificially low quantities. But for now, coffee futures are still low. This shows that the future of coffee itself is an open question.

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