The devaluation of the Brazilian currency is good news for coffee bean bears.
Short investors in coffee beans are likely to benefit from the devaluation of emerging market currencies.
As a result of economic stagnation and the collapse of oil prices, the currencies of Brazil and Colombia, the world's largest supplier of Arabica coffee (Arabica coffee), have depreciated, with the Brazilian real down 25 per cent so far this year. The Brazilian real and the Colombian peso have fallen the most against the dollar in the past six months.
The devaluation of Latin American currencies has stimulated coffee bean exports, increasing the global supply of coffee beans. According to the relationship between supply and demand, coffee bean prices will also be under pressure.
According to Rio de Janeiro-based brokerage Flavour Coffee, Brazilian exports increased by 300000 to 3 million in August from 2.7 million in the same period last year, the third consecutive month of increase. The price of a bag of coffee beans weighs 60kg. Arabica coffee futures fell for the fifth day in a row, hitting an one-and-a-half-year low, Reuters reported.
Us money managers' bearish sentiment on coffee also rose to its highest level since July last year, as the price of coffee beans fell for three consecutive weeks, the longest since March.
As of Sept. 1, hedge funds held 18392 net short positions in coffee bean futures and options, according to the latest data released by the US Futures Trading Commission (CFTC). Money managers have been bearish on coffee prices almost every week since February.
"Local coffee growers have every reason to increase exports," Itau Unibanco Holding SA economist and commodity analyst Artur Manoel Passos told Bloomberg. The devaluation of currencies in emerging market countries may have an impact on coffee prices in the second quarter of next year. " Passos was the most accurate analyst to forecast coffee bean prices in the second quarter, according to a ranking compiled by Bloomberg.
Even as the devaluation encouraged producers to sell, coffee planting in Brazil is slowly recovering from the 2014 drought. At the same time, demand for coffee beans is also rising.
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