Crop Damage Gives Coffee ETNs a Jolt

The coffee market and related exchange traded notes are experiencing wild swings as traders assess the extent of weather damage in Brazil, the world’s largest producer of coffee beans.

The iPath Bloomberg Coffee Subindex Total Return ETN (NYSEArca: JO) jumped 3.4% on Monday after surging 3.8% in the previous session. The iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) also gained 2.7% after rising 3.7% Friday. Both JO and CAFE are now trading above their long-term, 200-day simple moving average.

Related: Coffee ETN Pullback Could Spell Opportunity

Coffee prices strengthened on heavy rains that disrupted coffee bean harvests, which also caught short sellers off guard.

Above average rains in May continued into June, damaging coffee beans and affecting the drying of beans on farms, reports Shweta Upadhyaya for Agrimoney.

“Persistent rainfall has hurt the quality of Brazil’s arabica crop since last week,” Cooxupe, the country’s largest coffee exporter, told Agrimoney. “Wet weather is damaging beans and causing them to drop from trees.”

The rains have sped up maturation of beans and hindered production of valuable beans such as semi-washed arabicas.

Additionally, the Cooperative of Coffee Growers in the Mina Sul area said that most of the progress in coffee harvests is made from June to August and the ongoing rains will “paralyze the harvest.”