(Bloomberg) -- Arabica coffee futures dropped in New York on speculation the crop in top producer Brazil may escape the latest cold snap relatively unscathed.
The most-active contract fell as much as 4.2%, erasing the previous session’s gains. Main coffee-producing areas in south-central Brazil are still cold, but the risk of frost remains low and temperatures are expected to rise later in the week, Climatempo meteorologist Nadiara Pereira said in a report.
“It feels like we’re in coin-flip territory,” said Alex Boughton, a soft-commodities broker at Sucden Financial. “The damage is not as bad as was initially feared, but the market is going to remain hyper-reactionary until the weekend at least.”
Brazil’s green-coffee shipments rose to 3.4 million bags in July from 2.7 million a year earlier, according to exporter group Cecafé. That’s helped to alleviate recent concerns that droughts had affected this year’s bean development, prompting some analysts to reduce coffee production estimates.
Stronger shipments from Brazil and other top producers “could help defuse supply and price concerns,” and global coffee prices appear to have peaked, Bloomberg Intelligence analyst Alvin Tai wrote in a note. Still, retailers may be passing on residual high prices to consumers, Tai said.
--With assistance from Dayanne Sousa.
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