Coffee prices continued to rise this week, closing at a three month high on Wednesday, as traders continue to worry about poor weather conditions that have now spread to Central America.
Guatemala’s government on Monday declared a state of emergency due to one of its worst droughts in decades. Arabica coffee for December delivery rose 0.4% to $1.9815 a pound, the highest closing price since May 7. Futures are now up more than 80% year-to-date as a record lack of rain in Brazil has damaged the crop of the world’s top coffee producer.
Cotton futures were also up Wednesday, rebounding from a bearish first half of 2014. Futures have slumped roughly 20% this year, making it one of the worst performers in the commodities space, as global stockpiles have increased to a record high and demand has weakened. Traders believe it may be forming a bottom, as futures have climbed roughly 3% this week.
“Cotton has broken out to the upside, showing signs of a potential bottom,” said Lannie Cohen, president of Capitol Commodity Services.
Earlier this month, the United States Department of Agriculture said cotton stockpiles in the U.S., the world’s biggest exporter, are likely to more than double to 5.6 million bales by July 2015. This would be the biggest increase since 1986. Global reserves are poised to reach an all-time high of 105 million bales, according to USDA estimates.
And with harvest season closing in, grains remain in focus. September soybean futures dropped to a contract low, and near a four-year low early Wednesday, but rebounded later in the day. Weather conditions remain good, with ample rain keeping the crop nourished in the Midwest. Late on Monday, the USDA said 70% of the soybeans were in good to excellent condition.