Coffee falls to seven-month low on supply prospects

Coffee fell to the lowest in almost seven months in New York amid an improving production outlook in some key producers.

Expectations of higher global output in the second half of the year have pushed down differentials - the difference between cash and futures - in Brazil and Columbia, according to Guus Bremer, a trader at London-based importer DRWakefield. That has pressured arabica-coffee futures, despite shrinking inventories in exchange-monitored warehouses.  

DRWakefield expects Colombia’s supply and demand to be balanced next season. Brazil’s crop conditions remain favorable, while dry weather has accelerated harvesting. The country’s real has also weakened lately, which can encourage producers there to release stocks.

Prices of the cheaper robusta variety have also eased this month in London, but remain historically high amid supply constraints.

"If the robusta market remains this tight, demand can shift to Brazilian conilons but also to low-grade arabicas to compensate,” Bremer said. "It’s still a long way until the new crop in Vietnam and Indonesia kicks in, so I guess the spot and nearby stock will remain very popular for the time being.”