Coffee prices experienced a massive rally over the past 3 days and reached the highest levels since November 2014! Gargantuan price increase can be explained with an unexpected arrival of frost in Brazil. Poor weather conditions threaten to destroy a large part of this season's crop. Local farmers say that such frost has not been seen since 1994. A point to note is that coffee is often planted in mountainous terrain, where temperature swings can be large.
Earlier in the week it was reported that frost is subsiding. However, Brazilian National Institute of Meteorology reported that temperatures in the Minas Gerais region dropped to -1.2 degrees (Celsius). Low crops were expected even before frost arrived (due to earlier droughts). However, Brazil has large coffee inventories and some disagree with the large impact of frost on the prices. Moreover, production in the other parts of the world is unaffected, which leads to stabilisation in Robusta coffee prices.
Coffee prices rallied this week. However, price gains are fuelled by concerns over potential crop damage, rather than actual data. Brazilian real remains weak. Source: xStation5
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