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Breakout of the Decade

#Coffeefutures have broken out of the 200-210 range, surpassed its post #frost high of highest 217.85, and even surpassed the highs of the 2014 #Brazil #drought. This puts the current bull #market as the highest #coffee prices in nearly a decade. How strong is this bull market, and where do we go from here? From Brazil, Destination Stocks, to Chart, I break down some of the biggest drivers on price in the sections below.

Brazil 22/23 Crop

As per usual, the #coffeemarket depends on Brazil. Last year (21/22 crop) we had a drought that knocked lower an already off-season crop, and we capped it off with a dramatic frost and follow-up drought that damaged the expected bumper crop for 22/23. Some of the first estimates and analyses of the 22 crop are starting to trickle in.

After the frost/drought damage, the Brazil crop was saved by heavy and extensive rains in end of Sep through October that headed off disaster and replenished the soil moisture to kick off the delayed wet season. Although these rains were necessary and sufficient to stave off disaster and further damage, the damage was already done. A severe frost will kill off foliage, top-growth, and young shoots of the coffee plant and can depress the succeeding 2-3 years harvest. The widespread, severe frost is well documented and well-known. What is not known, is an exact quantification of the damage. Several surveys with varying degrees of credibility were done in the weeks that followed the frost , with consensus estimates ranging from 3 - 10 million bags off the 22/23 crop. The rains that followed the frost and drought produced very nice flowerings, but now we have to see how many of those flowerings were successfully pollinated and will grow into cherries. Then next best data point that we have will be the number of pinhead cherries that we see on the branch. After a successful pollination, the flowers fall off and the ovaries of the plant swell (slowly at first) and but are visible within about 2 months. These are the pinhead cherries.