Wow, what an interesting 4 months following the Coffee Commodity markets. If you are unsure of the back story, here is a link to my opinion piece 10 weeks ago when the market sky rocketed. Click here to read the previous articleAs the Harvest approaches in Brazil, we are hearing more and more reports of this…Underdeveloped, and rotten beans inside of otherwise healthy looking cherries. Coffee trees are producing healthy amounts of cherries, but many are ripening very early. We will not know how many of the cherries are carrying bad beans until the harvest, which is approaching in number of weeks, not months.The good news, is that because commodity prices are high, the farmers are in no hurry to harvest. A sustained high point in the market is a sign of a comfortable income for farmers for the upcoming season. Realistically, we are six months out from a fresh crop being available for sale, there is still a lot of coffee unsold, which farmers are now getting great prices for.What this means is that farmers are very comfortable financially now, relative of course. They can afford to reinvest in next years crop. Due to the fact that it is going to be a low yield, the best thing for farmers to do is invest in processing. This will give a better quality bean that will result in a higher price and in a strong market, it is the best way to capitalize on the situation.Long term what should we see? The market goes through natural ups and downs with a steady increase. In 2011 and now, we have seen abnormal spikes in the market due to climate and consumption market changes.
If you smooth out this graph, you will see that the market, removing the two previous mentioned events, should be sitting at the 150-160 mark. All the farmers I talked to have said 150 is a sustainable level, so 160 should see room to grow and improve.Given the challenges of trying to buy off the market, see previous articles of mine, a level of 160 should normalize the coffee trading and growing industry. The next few years should see if anyone knows what they are talking about, or if I too, am just speculating.
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