Volatility hits robusta coffee as prices slump from recent high
Robusta coffee slid in London, pulling back from last week’s high, amid a US holiday that contributed to volatile prices.
Futures had soared to the highest since the 1970s on concerns about tighter supplies out of Vietnam and Brazil due to unfavorable weather. Prices topped $5,000 a ton on Friday, pushing robusta’s relative-strength index toward overbought territory. The commodity slipped as much as 5.5% on Monday.
“We are in a low stock environment, which guarantees volatility,” said Carlos Mera, an analyst at Rabobank. Traders also need to consider other factors, such as shipping disruptions around the Red Sea, congestion in Brazilian ports and the European Union’s incoming deforestation rules, he said.
“Even though these fundamental factors are difficult to quantify, at these heights the market moves independently of fundamentals,” Mera said.
The rally in robusta — used in instant drinks — has narrowed its discount to the higher-quality arabica variety. The spread last week was at the smallest in data going back to 2008, according to figures compiled by Bloomberg.
