Coffee futures soared 10% to their highest in a year after
the return of rains to parts of central Brazil, after a near-two-month drought,
missed many major growing areas, turning the drought into a "credible threat"
Arabica coffee futures for May, New York best-traded
contract, touched 156.65 cents a pound, the highest for a nearest-but-one
contract since January last year, amid fresh concerns over dry weather in Brazil, the top
grower and exporter of the bean.
At that price, the contract was up 39% so far in 2014.
While weekend rains reached Minas Gerais, Brazil's top
coffee producing state, amounts represented only a small proportion of the rainfall
deficit suffered since late December, especially in north easterly areas, where
temperatures reached 94-100 degrees Fahrenheit (34-38 Celsius).
'Dryness likely to
And the state is expected to remain relatively dry.
This week, "some dryness is likely to linger across central
Minas Gerais," meteorologists at MDA said.
At WxRisk.com, Dave Tolleris said that, in the
one-to-five-day outlook, "most of east central Brazil including Bahia Minas
Gerias into Sao Paulo stays pretty dry".
And heading to the end of February too, Minas Gerais looks like
proving dry, missing out on Mr Tolleris termed a "wide plume of rain and
thunderstorms coming in from the southwest portions of the central Atlantic" to
more southerly states, such as Parana, and to more westerly areas, such as Mato
Brazilian consultancy Somar said that the Cerrado region in northern
Minas Gerais would receive at most 14mm of rain over the next five days, with
many other areas receiving less.
This following a December-January period in which southern
Minas Gerais received half of normal rainfall, or less.
Judith Ganes-Chase, the veteran soft commodities analyst,
said: "The dry weather now becomes a credible threat to the 2014-15 production
"The 2014-15 Brazilian crop had potential to be a record
breaker due to the possible enormous size. But now it may be remembered for
breaking a different type of record - the first Brazilian crop to be seriously
jeopardised by dry weather after it has successfully flowered."
Typically, central Brazil sees wet weather from December,
when its sugar cane mills take a seasonal break to avoid the rains.
Ms Ganes-Chase added that "it is perhaps more the high
temperatures than the lack of rain that could hurt the crop more.
"The area of dryness covers much of the coffee region and
reservoirs that provide moisture to the region are already running low."
Now, "the question is by how much can the crop be reduced," she
said, flagging that Brazil typically requires some 52m bags to cover typical
exports and domestic use – it is the second-biggest consuming country after the
Coffee trader Olam International on Friday estimated the
crop at 50m-51m bags, compared with an initial forecast of 57m-60m bags while Cooxupé,
the world's biggest coffee co-operative – which has likened affected, hollow cherries
to "bubblewrap"- has estimated losses of up to 30% within its footprint.
The Fundação Pró-Café producers' group has estimated losses
in southern Minas Gerais at 20%.
One key factor in determining losses will be the degrees to
which the drought causes to cherries fall from trees, so escaping harvesting.
The Conselho Nacional do Café producers' group warned that the
"drought, combined with high temperatures, may cause premature dropping".
Ms Ganes-Chase said: "If the cherries start to fly from the
trees, dropping prematurely then there is no return for that lost coffee."
New York's May arabica coffee contract stood at 152.70 cents a pound as of 10:45 local time (15:45 UK time), up 7.2% on the da.