Coffee prices have experienced dramatic fluctuations, with volatility reaching a four-year high.

This week, concerns over tightening supply of Brazilian coffee, tariff policies, and profit-taking behavior have driven coffee prices to fluctuate significantly, with the volatility of New York coffee futures reaching a four-year high. Arabica coffee is the preferred variety for making specialty coffee at chain brands like Starbucks. Earlier this week, due to dry weather in Brazil, the world's largest coffee-producing country, and the imposition of tariffs on coffee from this South American country by the United States, Arabica coffee prices approached historical highs. This price surge may not only further increase costs for coffee roasters and consumers, but also push futures prices into overbought territory. Subsequently, algorithmic traders began to take profits, coupled with exchanges raising margin requirements, causing coffee prices to fall. On Wednesday, Arabica coffee prices saw the largest single-day drop of 9.1%, marking the biggest single-day decline since 2008. The trading volatility this week has pushed the 60-day historical volatility index to its highest level since October 2021. On Thursday, coffee prices rose by 1.5% at one point, reaching $3.8135 per pound, before the gains narrowed. Gnanasekar Thiagarajan, head of commodities research at Commtrendz Research, said on Wednesday that profit-taking pressured coffee prices lower, while the market expected major coffee growing regions in Brazil to receive rain. After approaching historical highs earlier in the week, from a technical standpoint, the current market is prone to corrections, potentially testing the range of $3.45 to $3.25 per pound. However, Thiagarajan also mentioned that there have been some bargain-hunting buyers after the price correction. He added that the dry weather before the key flowering period in Brazilian coffee, tight inventory levels, and trade concerns are still supporting the coffee market. Harry Howard, soft commodities broker at Sucden Financial Ltd., said that coffee prices may continue to fluctuate, with support around $3.50 per pound and resistance near $4 per pound. Traders will continue to monitor the impact of weather on Brazilian coffee crops. According to the meteorological agency Somar Meteorologia, intermittent rain is expected in major coffee-producing states like Minas Gerais, Espirito Santo, and Bahia from Thursday to Friday, but some other areas may experience dry weather until the weekend.