Brazil Coffee Bean production cut Global Market supply tight Arabica Futures prices rise to four-year highs

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According to OLAM, an international coffee trader, the drought in Brazil's coffee producing areas last year was a decline in Brazilian Arabica coffee bean production this year, and the world may have the biggest shortage of Arabica coffee beans in 20 years. OLAM expects Arabica production to be 35.5 million bags (60 kg / bag) this year.

At the same time of the decline in coffee bean production, some countries are slowly getting rid of COVID-19 to begin their economic recovery, the consumer demand for coffee is also increasing, the balance between global coffee supply and demand has become extremely fragile, and the supply market has begun to have strong concerns.

The chairman of CECAFE said that the current level of coffee stocks in Brazil is very low, which means that the market is difficult to withstand the impact of large-scale production cuts. Due to the shortage of supply, many coffee traders predict that the price of coffee will rise because of the shortage this year.

Last year, the benchmark price of international coffee futures was between 90 and 110 cents per pound, but this year it began to rise, showing 120 cents, then fluctuated between 120 and 140 cents, and is now back close to 140 cents. OLAM said tensions over coffee shortages will continue to push up coffee prices until 2022.

The July futures contract for Arabica coffee closed at 145.90 cents / lb on Thursday, April 28, US time, the second highest closing price since February 2017, when the highest closing price was 167.65 cents / lb, Reuters reported.

(Arabica futures price trend since 2015)

The rise was mainly due to strong concerns caused by coffee supply shortages and the recent strengthening of the Brazilian currency, the real. Brazil's currency, the real, rose to its highest level in nearly two and a half months on April 28. This appreciation has reduced the idea of coffee growers and traders selling coffee beans, thus boosting the price of Arabica.

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