2014.06.0304:14:18UTC+00Good weather leads bear traders to coffee

Disengaging from its significant gains in April this year, coffee from Brazil looks to be headed toward a bear market on the back of a recovering harvest brought on by timely rainfall.

Future contracts in coffee reached its highest value in two years earlier in April as a drought affected prime coffee growing areas in Brazil. As the number one producer and exporter of the commodity in the world, Brazil’s decreased output severely raised the price per pound in the commodity market to a peak of $2.148 on April 24 of this year.

Yesterday, July contracts for a pound of Arabica coffee dipped to $1.7235 at the ICE Futures market in New York, showing a loss of 2.9% from its previous close. Should the downward trend continue, it will makes the chances of coffee entering a bear market more than a mere possibility. What is needed now to fulfill the definition of a bear market is a market close price of $1.7184 or 20% below the year high achieved in April.

Fears of the Brazil drought further damaging harvests were put to rest by rainfall in the months of March and April driving prices back down on higher expected harvest yields. Mercon group estimates that coffee growers in the country will have an output of 50.5 million bags this season, 1 million more than last month’s forecast of the US Department of Agriculture.

According to the Green Coffee Association in New York, the US, the top consumer and importer of coffee beans in the world, boasts an April stockpile 7.6% greater compared to the year before.

Coffee surged the most this year with a 56% rise when an exceptionally long 3 month period with minimal moisture covered planting areas in Brazil.