Coffee futures in New York and London experienced volatility as persistent supply concerns continue to exacerbate volatility.
Robusta crude oil futures fell 2.7% in London on Monday and then fluctuated between gains and losses. In New York, Arabica coffee futures fell 2.6% before narrowing.
Daria Efanova, research director at Sucden Financial, said in a report on Monday that persistent drought in Vietnam, the largest exporter of Robusta coffee, has exacerbated price fluctuations. This has brought the 60-day price volatility indicator close to the highest levels since at least 2008.
"Although we expect it to remain bumpy in the near term, our long-term estimate is still mildly optimistic," said Efanova.
She added that the volatility of Arabica coffee has also increased, as people are concerned about below-average rainfall in Brazil, the largest supplier, and rising speculative demand due to a tight cocoa market.
"This largely depends on weather patterns in the coming months," Efanova said. "We are cautious about potential heat waves and heavy rain, which could significantly change the prices of Arabica and Robusta coffee."
Marcelo Moreira, who tracks the coffee market for Archer Consulting, said fund managers have recently increased their long positions in coffee, but their moves could bring some downward pressure on prices in the short term. He noted that investors are also focusing on July Arabica coffee options expiring on Wednesday, with large amounts of outstanding put options.