(Bloomberg) -- Arabica coffee eased as forecasts signaled rain in parts of top producer Brazil, which has faced persistently hot and dry weather.
The most-active contract fell as much as 2.7%, easing after futures earlier this week soared to the highest level since 2011, largely on concerns about Brazil’s crop as the country faces its worst drought in decades. Prices are up by almost 40% this year.
Rains are slated to bring some relief to crops. The two-week Global Forecast System model has started to show some precipitation in the Brazilian coffee belt, potentially enough to trigger flowering, according to Rabobank analyst Carlos Mera.
“If these rains materialize, it is crucial that they are consistent and that there is ongoing wet weather to help maintain the flowering process,” Mera said in a report this week. However, “if initial rains trigger a large round of flowering followed by two weeks of dry weather, the crop’s potential will be lost,” he added.
While isolated rains expected in Brazil’s southern coffee area won’t be enough to boost soil moisture, they should provide relief from the current harsh conditions, Climatempo meteorologist Nadiara Pereira wrote in a note Thursday.
Rains in Brazil are also cooling orange juice futures, which fell as much as 4% Thursday. Prices had surged to a record high above $5 a pound earlier this month, after top producer Brazil cut its production estimate due to droughts.
Both coffee and orange juice markets “had climbed a wall of worry about the extended Brazilian dry season and extreme stress the trees have been under ahead of the main flowering period,” Judy Ganes, president at J. Ganes Consulting, wrote in a Thursday note. “Now that rain is in the forecast, the clock was stopped on additional drought stress damage that would be irreversible.”
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