MILAN – Coffee prices rose over seven percent on Tuesday reaching their higher levels in more than two year. Arabica coffee for July settled at $2.134 a pound yesterday on ICE Futures U.S. in New York. Earlier, after reaching the highest interday price since Feb. 14, 2012.
The new surge was triggered after a major trade house cut its forecast for the 2014/15 Brazil crop in its latest survey.
Swiss Winterthur-based Volcafe said in a report that worst Brazilian drought in decades ravaged plants earlier this year, so that the Arabica crop will be 18 percent lower than projected, or 28.4 million bags.
The influential coffee merchant, part of ED&F Man, also raised its estimate for Brazil’s robusta coffee production by 1.0m bags to 17.1 million bags.
This makes a total of 45.5 million 60-kg bags for Brazil’s crop 2014/15, down from two previous projection of 50.7 million and 60 million bags issued by Volcafe in January and in November respectively.
This is the latest of a string of reduced outlooks in recent months due to drought damage in the top producer.
Volcafe raised its estimate for the world production deficit in CY 2014-15 to 11m bags, from 6.5 million bags. This would be the first deficit after four years of surplus or balance .
Volcafe cautioned over another shortfall the following season too.
“The recent unprecedented weather has affected both the 2014-15 and 2015-16 crops,” the broker said.
“Even under the most optimistic scenario for the 2015-16 Brazil crop, we expect a second consecutive coffee market deficit in that season.”
