Coffee

Coffee prices tick lower as fears of Brazil frost ease

On Thursday, coffee prices sharply edged down as investors’ worries about frost risks in top producer Brazil began to recede.

Arabica futures plummeted 4.19% or 9.52 points to $217.68 per metric ton. Consequently, robusta contracts declined 1.95% or 41.00 points to $206.30 per metric ton.

Accordingly, bean prices sold off as winds and clouds in Minas Gerais prevented a severe temperature drop.

The area was Brazil’s largest arabica-growing region, accounting for 30.00% of the country’s yield.

Thus, the change in weather removed the threat of frost that could eventually hurt crops.

In addition, the increasing supplies sparked a bearish indicator for the commodity. Green Coffee Association recently reported that US bean inventories inched up 1.50% month-on-month in April. At the same time, stocks posted an annual increase of 2.50% to 5.91 million bags.

Meanwhile, concerns about the smaller coffee yield from Vietnam, robusta’s leading exporter, remained supportive of prices. The soaring fertilizer costs might force farmers to slash usage, leading to a 10.00% drop in production next season.

At the same time, there is also slower output from Colombia, the second-largest arabica producer. The state’s April coffee exports dwindled 18.00% year-over-year to 845,000 bags.

Coffee to benefit from easing Chinese lockdowns

Furthermore, coffee prices could rebound in the near term as China announced to gradually ease its COVID-19 related restrictions. The previous limits kept restaurants and cafes closed, curbing consumption.

Correspondingly, financial hub Shanghai has granted approval to 864 institutions to resume work after a city-wide lockdown. The area has also allowed key manufacturers to continue their operations.

These positive announcements reduced the coffee demand concerns in the second-largest economy.
Additionally, the Russia-Ukraine geopolitical crisis has also curbed Brazil’s coffee exports. It is down 72.00% on a monthly basis in Moscow and 62.00% lower MoM in Ukraine.

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