Thursday 30 June 2022

FUTURES MARKETS – Coffee prices rally on bullish news from Brazil

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MILAN – New York coffee prices recorded their biggest two-day rally in six weeks boosted by unfavourable weather reports from Brazil as well as by a bullish estimate released on Friday by Brazil’s National Coffee Council (CNC) that predicts a sharp fall in production in 2014 and 2015.

Arabica futures have surged 9.3 percent Thursday’s settlement and are likely to head towards last month’s two-year peaks, according to analysts.

Arabica for delivery in May on ICE Futures U.S. ended up 4.5% at $1.9335 a pound Monday, the highest settlement since March 14.

A study from Fundacao Procafe, a coffee research foundation based in Varginha, Minas Gerais, has lowered the estimate for the 2014 harvest, which is expected to begin in May, to between 40.1 million and 43.3 million bags in coffee year 2014/15 and 38.7 to 43.6 million bags in 2015/16.

The downward correction was motivated by the “unexpected climate situation this year in Brazil’s coffee-producing belt, with a lack of rain especially in January and February.”

“Numbers like the ones we saw…are pushing most (traders) to take the safe route and lock in long positions,” said Hector Galvan, senior market strategist at brokerage RJO Futures in Chicago, referring to bets that prices will rise.

“I would believe that we are quickly on our way to close above the $2 (level) and likely stay above it for some time,” Mr. Galvan said.

Dry weather is expected to return to Brazilian coffee-growing areas after sporadic rains in March.

“Throughout this week, we should have little or no chance of rain in most of the coffee areas,” Somar said in a forecast released Monday.

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