Brazil is getting dry again and the coffee bulls are back.
Growing regions are forecast to get about half the normal rainfall this month and in February, according to Celso Oliveira, a meteorologist at Somar Meteorologia in São Paulo. Brazil is the world’s biggest grower and exporter, spurring hedge funds to increase their bets on higher prices for the first time in six weeks.
After more than doubling to last year's peak in October amid the worst drought in decades, coffee ended 2014 in a bare market after heavy rains in November. The return of dry weather sparked renewed risks of damage to flowering coffee trees, sending prices up 12 per cent last week, the biggest gain in almost 11 months.
"Coffee is very weather-dependent," John Stephenson, chief executive officer of Toronto-based Stephenson & Co. Capital Management, which oversees C$50 million, said in a 9 January phone interview. "You’ve seen a massive drawdown in stockpiles in Brazil. When that’s coupled with the drought, supply is tight-to-constrained."
Arabica coffee for March delivery surged 19 cents last week to $1.8005 a pound on ICE Futures US in New York. Prices rose 9.3 per cent this month, the most among the 22 components in the Bloomberg Commodity Index, which fell 1.6 percent. The MSCI All- Country World Index of equities declined 1.3 per cent and the Bloomberg Dollar Spot Index climbed 1.3 per cent.
Bloomberg News edited by ESM
