Coffee prices fell 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.
Arabica coffee for July delivery fell 1% to $1.294 a pound on the ICE Futures U.S. exchange.
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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.
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 the bears outweighing the bulls by 13,585 contracts as of Tuesday last week, according to data from the U.S. Commodity Futures Trading Commission.
In other markets, raw sugar for July lost 1.3% to 14.81 cents a pound, cocoa for July rose 0.3% to $2,044 a ton, July frozen concentrated orange juice futures lost 1.5% to $1.344 a pound and July cotton was off 0.5% to 76.86 cents a pound.
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(END) Dow Jones Newswires
May 31, 2017 12:12 ET (16:12 GMT)