Arabica coffee futures' reluctance to fall below 100 cents a pound for the first time in seven years may prove only temporary, analysts cautioned, amid fears that the low values will prompt a fresh wave of producer protests.
New York coffee futures recoiled last week from falling below the psychologically-important 100-cent-a-pound mark - with the spot December contract hitting 100.95 cents a pound on Thursday before staging a recovery which has taken the lot back above 104 cents a pound.
However, Macquarie cautioned that further price falls appeared "inevitable", given the "chronic surplus" in the world coffee market, for which production will in 2013-14 exceed demand for a third successive season.
And, with rains helping flowering ahead of next year's Brazilian arabica crop, the world's biggest, 2014-15 looks like providing a fifth successive season of production surplus.
'Prices to keep grinding lower'
"Prices have already fallen by two-thirds since their peak of $3 a pound in September 2011," Macquarie analyst Kona Haque said.
"Yet we are struggling to see fundamental support factors that can help turn this market around.
"The global market is well supplied, and demand remains softer than pre-2009 growth rates."
Indeed, prices look set to "keep grinding lower into the 90s cents a pound" until the April-to-June quarter of next year, when the potential for Brazilian frost typically prompts investors to inject some risk premium into prices.
'Coffee to sink lower still'
Separately, respected soft commodities analyst Judith Ganes-Chase said of the revival in coffee futures that "I would not expect the sizzle to last", adding that "fundamentals still point to coffee sinking lower still".
Ms Ganes-Chase, at J Ganes Consulting, also highlighted the strong prospects for Brazilian production, saying that the country's "coffee crop has already been blossoming under fantastic conditions and this solidifies my view that the crop could potentially even reach 60m bags - a first for Brazil".
Macquarie pegs the harvest at 59m bags, itself a record.
While low prices prompt some response in terms of lower output for annual crops, such as grains, for coffee producers, the decision to change crops is not so easy, given the investment in planting trees with a productive lifespan of many years.
"A coffee producer's investment in his crop is a longer term decision and so when prices fall they are not going to immediately react and pull out trees even when the market has fallen below their costs," Ms Ganes-Chase said.
"The coffee market has fallen to near 100 cents per pound, but it is unlikely that the downtrend is over."
Fresh producer protests?
This would extend the losses facing producers who, in Brazil, have a production cost of some 120 cents a pound, Macquarie estimates.
Indeed, growers in Brazil are urging further government support through a coffee pact, proposing measures such as a government coffee stockpile equivalent to 50% of exports, and threatening as-yet-unspecified action by producers if their demands are not met.
Separately, Colombia too, where farmers in February and March blockaded roads to press for state support, could face protests, given fraud which has meant some funds from a government subsidy programme being directed at beans smuggled in from Ecuador and Peru.
"The bulk of the harvest is underway in central Colombia with coffee farmers expecting to receive the promised subsidy," US Department of Agriculture staff in Bogota said.
If officials do not top-up the subsidy fund, potentially allowing support to expire, "this will likely result in coffee growers again taking to the streets in protest at a time when the Colombia government appears to have resolved the violent, nationwide agricultural protests that ended last month".