Brazil to be Hit by frost: Arabica coffee rebounds to set new seven-month high

LONDON: Arabica coffee futures on ICE rose on Wednesday, heading towards this week’s seven-month highs as a weaker dollar and lingering worries over frost risk in top producer Brazil prompted funds to cover their shorts.

September arabica coffee rose 2.9 cents, or 2.6%, to $1.1245 per lb at 1342 GMT, after touching $1.1410 on Monday, its highest since Nov. 29.

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South and central Brazil are expected to be hit by the coldest temperatures of the year in coming days, and frost will likely form in some coffee areas, but it is unlikely to be widespread and will not be intense, forecasts indicate.

“Industry is not panicking at all about this frost but overall prices are still pretty cheap so the market needed some kind of (rebalancing). We’re probably back to where we should be if we look at fundamentals,” said a dealer.

In the wider markets, the dollar edged lower, undermined by the steady fall in US Treasury bond yields, fading optimism over the China-US trade deal and the possibility of fresh tariff hostilities with Europe.

A weaker dollar and stronger real can discourage selling by Brazilian producers.

In industry news, companies such as Nestle are willing to pay a premium for Zimbabwe’s coffee beans, leading small-scale farmers to return to a sector that was all-but destroyed under former President Robert Mugabe.

September robusta coffee rose $13, or 0.9%, to $1,457 per tonne, after touching a more than three-week peak of $1,489 on Monday.

Copyright Reuters, 2019

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