On the futures market, arabica coffee — the smoother variety favored by companies like Starbucks Corp. — is languishing near a 13-year low. Growers in Brazil, the world’s biggest exporter and producer, have expanded output and become more efficient, collecting more beans for every planted acre. The result is a huge glut that’s sent prices below break-even in many countries, sparking fear producers will leave the industry.
“The fundamental dysfunction is often times farmers will sell coffee at a price that doesn’t allow them to have a sustainable livelihood,” said Peter Giuliano, chief research officer for the Specialty Coffee Association, which represents producers, baristas and roasters. It’s not happening everywhere in the market, but it’s “happening often enough that we see it as a crisis,” he said.
If producers do pull back, it could eventually help prices to recover as the market shifts from surplus to deficit. Some traders, such as Marex Spectron, are even hopeful the rebound could be on its way soon. On Monday, July futures rose as much as 1 percent.In the week ended April 9, hedge funds held an arabica net-short position of 74,110 futures and options, U.S. Commodity Futures Trading Commission data showed Friday.
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