The coffee-related exchange traded fund is going through a market correction and dipping toward bearish territory as a rainy outlook helps relieve Brazil’s parched crops and the Brazilian export association reassures the markets that there are ample coffee stocks.

The iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO) declined 6.8% Thursday. The ETN has declined 16.5% since its March 11 closing high.

ICE Coffee futures were trading around $1.74 per pound.

Coffee prices declined almost 7% Thursday on growing hopes that rainfall will alleviate Brazil’s drought. The MDA Weather Services forecast 200% to 300% above average rainfall over Brazil’s coffee-growing regions over the next 10 days to bring “significant relief,” Agrimoney reports.

“If sufficient rains come in Brazil, this might take some of the weather premium out of the market, although some irreversible damage has certainly been done,” Birgit Wippler, soft commodities analyst with F.O. Licht, said in a Business Recorder article. “Prices will remain elevated at least until we get a clearer picture of the extent of damage from the drought, when farmers start harvesting.”

However, some argue that the rainfall will not be enough as the heavy rains in a short period would only run off the drought-baked soil. [An Awesome Agriculture ETF]

Brazil is the world’s largest producer and exporter of Arabica-grade coffee beans.

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