MILAN – Breaching again the $2 threshold, Arabica coffee futures rose to 25-month high on Thursday on renewed concerns about Brazil’s coffee crop.
The Coffee C contract posted gains for a sixth straight session. The most traded contract for May delivery jumped 3.13% to $ 206.10 a pound, after having reached an intraday high of $2.0773 a pound earlier in the session.
This is the highest settlement price since February 14th 2012. Prices have soared 19.3% since Thursday, 3rd April, as deteriorating prospects for Brazil’s production caused speculators to add to bullish bets.
Buying was sparked by a new report from Marex Spectron, a London-based brokerage, which forecasts a supply deficit of over 7 million bags in coffee year 2014/15.
A report from Commodity Weather Group predicting that heavy rain this weekend may delay the harvest in some parts of Brazil also helped to fuel the rally.
Brazil’s crop prospects may suffer for “at least three years,” Judy Ganes-Chase, the president of J. Ganes Consulting in Panama City, Panama, said in an email as reported by Bloomberg.
“The trees will not be able to immediately rehydrate after being starved of nourishment. Trees will also be more susceptible to disease, and there will be things that are not apparent now that will manifest down the line.”
Brazil has enough coffee stocks to supply exports and domestic demand this year even though a severe drought will result in a lower-than-expected harvest, the nation’s coffee industry association Abic said on Thursday, reports Reuters.
The association said its initial estimate for a crop of 47 million 60-kilogram bags will be probably further reduced when the extent of damage becomes clearer.
Even so, “the harvest is going to be large enough to supply the domestic market and exports,” Nathan Herszkowicz, executive director of Abic, stated at an event held in Sao Paulo.
