According to the composite and the future prices for both types of coffee beans, we can notice a significant decrease which continues the downward trend in the price that was seen in previous bulletins.
One reason for the price decrease in the composite graph, is the same as for the first two bulletins, it is that the Brazilian currency has been rising as we can see in the graph, we know that both are negatively correlated so when one goes up, the other generally goes down.
In terms of the futures prices, this decrease is due to a high supply of coffee beans on the market. We will explain more on what happened below.
Following an article on CNBC, we understood that the November Robusta Future Contracts were traded at a discount of 11-33 dollars. Therefore, Louis Dreyfus, one of the leading agriculture trading company, bought the majority of stock of Robusta beans because of the attractive price which is also used to reduce significantly the carrying costs it has because Dreyfus owns a number of certified warehouses across Europe including Belgium(4stox and Molenbergnatie). This allowed them to stock the beans in their warehouses without it costing them as much as it normally would’ve thanks to the low price of the Robusta.
We believe that this was a strategic move by Dreyfus, as this purchase along with the purchase of 33,360 tonnes of Brazilian Robusta beans was done to have the majority of stocks. Having this important part of inventory allowed the trading company to have the control as well as the power, compared to its competitors, on the physical supplies of Robusta beans.
We have discovered that the high production and supply of Brazilian Robusta beans bought by the European Market made the Vietnamese Robusta beans drop in price as they have also a big supply but no many buyers because most have bought from Brazil which had cheaper prices.
Overall, the price of coffee has been dipping because of the fact that there is too much supply in the market.
We can highlight that this over supply and sharp decrease in price is like in the oil market at the moment.
https://www.nasdaq.com/markets/coffee.aspx?timeframe=1m
https://www.cnbc.com/2018/11/20/reuters-america-louis-dreyfus-poised-to-take-back-strategic-robusta-stocks–sources.html
https://fp.brecorder.com/2018/12/20181204428466/
https://www.theice.com/products/15/Coffee-C-Futures/data?marketId=5352189
https://www.theice.com/products/37089079/Robusta-Coffee-Futures/data?marketId=5545668
http://www.ico.org/prices/p1-November2018.pdf
https://www.xe.com/currencycharts/?from=BRL&to=USD