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Arabica hit a 3-week high after the 20-month bottom

After four months in the cold, arabica prices are steaming again, with the benchmark March contract on ICE Futures U.S. hitting a three-week high of $1.68 a lb on Thursday after a 20-month bottom of $1.42 per lb on Jan. 11.

Arabica has rallied 10% over the past two weeks — recovering most of its 12% drop over three prior weeks — on concerns about the crop in top coffee grower Brazil. 

On a monthly basis, arabica prices are flat for January, after deficits of 0.2% in December, 5.6% in November, 19.8% in October, and 7.3% in September.

Arabica’s spurt higher comes after coffee trader Volcafe cautioned a week ago that the world would face a shortage in the commodity for a third year in a row due to a lower-than-expected harvest from top grower Brazil.

Arabica futures reached a decade high in February 2022 following two sub-par crops in Brazil and Colombia and global shipping disruptions. Prices have fallen almost 40% since then, brought down in part by market speculation that Brazilian growers will be gathering a record arabica crop this year.

Brazil now has the potential to only produce 40.5 million bags of arabica for the harvest starting in May, down from a July forecast of 49.8 million bags, Volcafe said, citing blossom issues in key areas of Brazil’s Minas Gerais state, the world’s biggest arabica producing region. The firm also trimmed estimates for the 2022-23 season by 1.1% due in part to frost damage.

Also read  Arabica coffee hits highest in more than 2 weeks