Arabica coffee fell the most in more than a dozen years, paring a monthly surge as concerns eased that severe weather would further damage crops in top shipper Brazil.
Frost overnight reached about 80 percent of south Minas Gerais, the country’s top producing region, but the effect was less than feared, World Weather Inc president Drew Lerner said.
The area might get “patchy frost” this weekend, he said.
Most sugar and citrus areas were spared the worst readings, and any damage was probably localized, Lerner said.
“Any losses from today’s event will be very limited,” said Carlos Mera, head of agricultural research at Rabobank International. “However, we still see some potential for frosts in the coming three days.”
Even with Friday’s drop, the risk persists that consumers would see higher coffee prices when global food prices in general are on the rise.
A recent cold snap in Brazil is a fresh blow to crops strained by drought and the worst frost seen in two decades. Freezing weather could squeeze global coffee supply for years, as it is particularly harmful to young trees.
Arabica coffee for September delivery tumbled 8.6 percent to settle at US$1.7955 a pound, the biggest drop since March 2008. The price was still up 12 percent for last month and more than 55 percent over the past 12 months after averse weather cut this year’s output and curbed the outlook for next year.
Pressure also came in from the foreign-exchange markets. The Brazilian real fell the most against the US dollar in almost two weeks, boosting incentives for growers to sell commodities priced in the greenback.
Trees in south Minas Gerais have been “affected significantly, and will struggle to recover for next year’s crop,” Lerner said. “The stress will be very high, it hasn’t been this cold in many, many years and the ground is already dry.”
Dry conditions makes it more critical for the timely arrival of rains next month, which could be delayed by La Nina’s return, he said.
“Brazil’s upcoming 2022/23 output has clearly been reduced by this month’s cold weather, so traders may use a sizable near-term pullback for a fresh opportunity to establish long positions,” the Hightower Report in Chicago said.
‧Gold for August delivery fell US$18.60 to US$1,812.60 an ounce, up 0.6 percent from a week earlier.
‧Silver for September delivery fell US$0.23 to US$25.55 an ounce, while September copper fell US$0.04 to US$4.48 a pound.
Additional reporting by AP
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