While the Brazilian coffee industry has stated that inventories are enough to meet demand for now, traders are pushing up coffee prices to hedge against lower crop yields next year – trees tend to produce lower harvests in the year following a dry spell.
“Even under the most-optimistic scenario for the 2015-16 Brazil crop, we expect a second consecutive coffee-market deficit,” Volcafe, a unit of commodity trader ED&F Man Holdings Ltd., said in a report.
Brazil is expected to produce 49 million bags of coffee for the 2014-2015 season, compared to previous forecasts of 55 million and last year’s crop of 53.3 million, leaving global supply 7.1 million bags short of total demand.
iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN
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