NEW YORK – Coffee futures posted new highs Monday on fund buying as the ongoing drought in Brazil threatens the country’s coffee production. The active contract for May delivery settled 685 points higher at 176.35 cent a pound. Commodity Weather Group said last month was the driest January in Brazil since 1954.
The extreme dry conditions began in early January and were exacerbated by unusually hot summer weather. More than 140 Brazilian cities have now begun rationing water to approximately 6 million people.
Rains continue to fall on some of Brazil’s southernmost coffee belt but are likely to weaken before arriving to the central part of top producing Minas Gerais state, local forecasters at Somar Meteorologists said on Monday.
Parana and Southeast Sao Paulo are expected to get 27 millimetres and 35 millimetres respectively in the next five days, less than both areas received in the past three days, Somar said in a daily weather bulletin.
Meanwhile, Rabobank have revised their price forecasts upwards.
The Dutch multinational banking and financial services company is predicting that the Arabica price will hover around USc 140 per pound for the first quarter of this year, climbing further to USc 150 per pound in the second quarter.
The bank forecasts that prices will retreat somewhat after predicted rains in the southeast of Brazil in the coming fortnight, however concerns about the damage already done to next year’s crop will keep prices up for the rest of the year.
Rabobank also predicts that with just 40 per cent of Vietnam’s crop sold to date, coffee prices will ease over the next few months as more Robusta becomes available.
The report has also revised its Robusta price forecast up to US$1,800 per tonne in the first quarter of the year and US$1,950 per tonne in the second quarter.
