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.
