Coffee Prices Fall As Brazilian Harvests Rise

Coffee prices dipped earlier this week after a market forecast suggested that the impending harvest in Brazil could yield 20% more crops than originally thought.

Upon the news, the cost of Arabica for March dropped 3.5% to finish at $1.116 a pound on the ICE Futures Market.

At one point, it fell as low as $1.111, the cheapest price seen since December 2013.

European prices also dropped.

The recent wet weather in the world’s largest producer and exporter of coffee is the primary reason for the revised projections.

According to the Agriculture Ministry’s forecasting agency, Conab, Brazil’s coffee farmers could haul in between 49.1 million and 51.9 million bags of coffee. This number is well up from last year’s 43.2 million total.

“Favourable weather conditions in the main arabica-producing regions, combined with the positive yield cycle, favour crops and explain productivity gains in most states,” Conab said in a statement.

However, Conab’s figures fall well below other projects made by other market analysts. Rabobank International, Ecom Agroindustrial and the USDA have posted estimates of 58 million, 60 million and 54.3 million respectively.

While good for farmers expecting bumper harvests this year, the news can be construed as being bad for the overall industry as, “all signs point to a likely supply-demand surplus,” explains Julio Sera, a Miami-based risk-management consultant.

Because of the ‘supply-demand surplus’, it is likely that after a brief rise, coffee prices could be heading downward.