Coffee Ends Lower on Brazilian Crop Forecasts, Currency

By Julie Wernau Features Dow Jones Newswires

Coffee futures ended lower Wednesday as speculators piled into short bets on the back of forecasts that call for a better-than-expected coffee production in Brazil, the world's largest growing region.

Continue Reading Below

Arabica coffee for July delivery fell 2.1% to end at $1.2935 a pound on the ICE Futures U.S. exchange.

In a note released before the open Wednesday, Citi Research upgraded its Brazil harvest forecast for the 2017/2018 season to 48.3 million bags, saying favorable weather was aiding crops in Espirito Santo and Bahia. The firm said they still foresee global demand outstripping supply by 3 million bags.

Still, J. Ganes Consulting said coffee stocks in the U.S., one of the largest consuming regions for arabica coffee, continued to swell and are at their highest level since 1994.

At the same time, the Brazilian real is down 1.8% this month against the dollar, which has encouraged sales of dollar-denominated goods such as coffee.

"Arabica coffee is among the crops most impacted and sensitive to depreciation in the Brazilian real," Citi Research said, adding that prices below $1.30 a pound appear to be oversold beyond the fundamentals of the market.

Continue Reading Below

Political turmoil in Brazil has weighed on the country's currency and fresh short-positioned traders in the market have helped move prices lower. Hedge funds and other money managers betting on lower coffee prices are at their highest level so far this year, with bearish contracts numbering 52,817 and bullish contracts numbering 39,232 as of Tuesday last week, according to data from the U.S. Commodity Futures Trading Commission.

In other markets, raw sugar for July lost 1% to settle at 14.87 cents a pound, cocoa for July rose 0.5% to end at $2,048 a ton, July frozen concentrated orange juice futures lost 2.1% to end at $1.3355 a pound and July cotton was off 0.4% to settle at 76.98 cents a pound.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

May 31, 2017 16:29 ET (20:29 GMT)