The rally in arabica coffee prices took on fresh life, sending the September futures contact soaring 6%, as a report from INTL FCStone revived concerns over losses in this year's Brazilian crop – and cautioned over the 2015 harvest too.
New York arabica coffee futures for September delivery soared 6.1% at one point to 178.60 cents a pound, crossing back over their 50-day moving average for the first time in two months.
The contact easing back in late deals to 176.20 cents a pound, a gain of 4.7%.
The jump followed the release of a briefing by FCStone's CoffeeNetwork indicating substantial damage to Brazil's coffee prospects from early-2014 drought – adding that rains were now a problem too, in encouraging untimely flowering ahead of next year's crop.
The briefing offered a tangible report on the extent of damage to Brazil's coffee crop, following waves of contrasting rumours on the severity of drought damage.
'Malformation of beans'
Tiago Ferreira, a senior FCStone's coffee executive, said that a field trip to parts of Minas Gerais, Brazil's top coffee growing state, and neighbouring Sao Paulo last week had revealed a rapid harvest – nearly 70% completed – but "noticeable" yields losses.
The decline is down to "[small] bean size, the malformation of beans, or even cases where there was no bean formation", Mr Ferreira said, estimating losses of at least 25% on what had been received.
"It is of note that the region of Franca [in Sao Paulo], which theoretically benefited more from rainfall during the grain filling period, was also affected," meaning it is likely that poor harvest results are "so pervasive" that they are applicable to other areas too.
In southern Minas, some co-operatives said that their harvest had been "much lower than expected at this point", down some 30% year on year.
And Mr Ferreira highlighted early indications of a poor crop next year too.
Trees which were not in production this year, having been pruned or borne heavily last year, did show the vegetative growth needed to support flowers which will bear coffee cherries for the 2015 harvest.
However, in other stands, such growth is "practically non-existent", and where it is present, appears too delicate to bear cherries.
He also cautioned over the levels of rust, a fungus which causes tree defoliation and even death, besides the impact of unseasonal rains, which were encouraging premature flowering, around two months early.
Some trees are "already dropping flowers" needed for cherry formation for 2015, he said.
"One could conclude that the crop was so compromised that net year's harvest will be small this year's."
The FCStone was "certainly a bit" of the cause of the rally in arabica futures, said Sterling Smith, futures specialist at Citigroup's Chicago office.
"We have been hearing regular reports similar to what FCStone were saying. But together with this report, the market sort of exploded," he told Agrimoney.com.
He underlined the danger to crop prospects from early flowering which, with Brazil set for a seasonally dry period, likely meant flowers dropping, and no cherries.