Coffee futures extended their recovery amid talk of results
from the Brazilian harvest living up to weak expectations, with ideas growing
of a fall in production too in Vietnam, the top grower of robusta beans.
Arabica coffee futures for July delivery soared 4.5% at one
point to 179.70 cents a pound in New York, rising back above their 20-day and
75-day moving averages, and up more than 8% in three sessions.
The September contract, which is picking up trading volumes
as the July lot approaches expiry rocketed 4.4% to 182.40 cents a pound.
London robusta coffee futures for September hit $2,023 a tonne,
up 2.6% on the day, and up 6.8% since Tuesday's close.
'Very wide range'
The recoveries came as the pendulum of doubt over Brazil's
crop size, which two weeks ago was seen as having suffered less severely from
early-2014 drought than had been thought, swinging back to ideas of more severe
"The difference between low end estimates and high end
estimates remains very wide and is at least 10m bags from the low end to the
high end," Jack Scoville at broker Price Futures said.
However, recent grower reports include one from the São
Sebastião do Paraíso co-operative in the south of Minas Gerais, the top
Brazilian coffee growing state, estimating its output at 2.45m-2.50m bags, down
from an initial forecast of 3m bags.
'Steady stream of
At Citigroup, Sterling Smith said: "We are getting a steady
stream of reports that beans are of small size, are malformed or not there at
all. Farmers are harvesting cherries without beans in them."
Lucio Dias, commercial superintendent at Brazil-based
Cooxupe, the world's largest coffee co-operative, warned in February of crops
resembling "bubble wrap, because there is only air inside".
Mr Smith said: "If you have 1 empty cherry, 2-3 malformed
beans, and 5-6 normal, that is going to lead down the road to crop reductions."
Talk currently is that it is taking some 600-700 litres of
beans to fill a 60-kilogramme bag, rather than the 400-500 litres normally.
The talk has unsettled a more optimistic consensus which was
building two weeks ago, through estimates from the likes of Interagricola,
affiliated to soft commodities trader Ecom, which pegged the crop at more than
51m bags and Mercon, with a figure of 50.5m bags.
Brazil's agriculture minister, Neri Geller, has been rebuked
by many in the industry over an estimate last week that Brazil's coffee output was
poised to recover next year, saying that "growers manage to take good care of
the trees because the prices have gone up, so we will have a bumper crop."
Sergio Francisco de Assis, president of the federation of
coffee growers of in the Cerrado region of Minas Gerais, said that Mr Geller
may have been poorly advised.
Citigroup's Sterling Smith said that it will be "difficult
even with perfect weather to match the crop this year" in 2015, which is anyway
an off year in Brazil's cycle of higher and lower production years.
Coffee beans are borne on vegetation grown the previous
year, meaning that vegetative stunting seen thanks to the early-2014 drought
will affect the 2015 harvest.
Meanwhile in Vietnam, ideas are mounting of a fall in
production this year, after dry weather in parts of the main Central Highlands
producing region, which an El Nino could exacerbate, and after a bumper harvest
last year, likely to induce tree stress.
"On top of the fact that coffee trees are fatigued after two
highly productive years, there could also be delayed and insufficient rainfall
as a result of El Niño," Commerzbank said.
The El Niño weather pattern often causes unduly dry weather
in South East Asia.
Analysts current see production falling by 4% to 1.64m
tonnes, a Bloomberg survey showed.
Arabica coffee for July stood at 174.75 cents a pound in
late deals in New York, up 1.6% on the day.
September robusta beans were 1.7% up at $2,006 a tonne in
London, looking to close above $2,00 a tonne for the first time this month.