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Arabica coffee hits 6-month low

Arabica coffee on ICE slumped to a six-month low on Monday as investors continued to scale back long positions with risk appetite dented by the conflict in Ukraine and lockdowns in China.

Coffee prices Monday extended last week's losses, with arabica falling to a 6-month low and robusta dropping to a 1-1/2 week low.  An easing of dry conditions in Brazil weighed on coffee prices Monday, along with weakness in the Brazilian real.  Somar Meteorologia reported Monday that there was 12.4 mm of rainfall (161% of the historical average) in the Minas Gerais area last week, an area that accounts for about 30% of Brazil's arabica crop.  

July arabica coffee fell 4.35 cents, or 2.1%, to $2.061 per lb after dipping to a six-month low of $2.0335.

Dealers said the weakness of the currency of top producer Brazil added to the downward pressure on prices. A weak Brazilian real encourages exporters to sell dollar-priced coffee as it raises returns in local currency terms.

July robusta coffee fell $63, or 3.0%, to $2,020 a tonne.

Vietnam exported 739,046 tonnes of coffee in the first four months of this year, up 26.2% from the same period a year earlier, government customs data released on Monday showed.

Coffee prices also remain on the defensive from global demand concerns.  The Chinese government said last Friday that it would continue with its stringent pandemic lockdowns in Shanghai and Beijing, which will keep restaurants and cafes closed and curb coffee consumption in China.  Also, the war in Ukraine has curbed Brazil's coffee exports, with Brazil's Mar coffee exports to Russia down -72% m/m and down -62% m/m to Ukraine.

Robusta coffee last Thursday rallied to a 5-week high on concern about smaller coffee supplies from Vietnam.  The Vietnam Coffee and Cocoa Association warned last Wednesday that the high fertilizer prices might force coffee farmers to reduce their fertilizer usage, which could lead to a 10% drop in coffee production next season.  Vietnam is the world's largest producer of robusta coffee beans.




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