NEW YORK: Arabica coffee futures will rise 22 percent by the end of 2018 on concerns over dry weather in top grower Brazil and expectations for volatile moves in the country's currency, a Reuters poll of 11 traders and analysts showed on Friday.
The survey's median forecast for ICE spot arabica coffee futures prices at the end of 2018 was $1.30 per lb, up 21.8 percent from Thursday's close.
The year-end price projection was down slightly from the consensus in Reuters' February poll at $1.3443.
"We feel that once the Brazilian elections get closer, the Brazilian real should see a strong rally, thereby providing a strong bid for US-based arabica futures prices," said Shawn Hackett, president of Hackett Financial Advisors in Florida.
Other poll participants also pointed to expectations for the Brazilian real to become increasingly volatile and supportive to arabica prices, leading up to the country's presidential election in October.
"Our weather work suggests that the current Brazil drought will impact the key September-through-November flowering period greatly and inflict even greater stress in an off-season year when coffee trees by their very nature need to rest from the larger output on-season crop," Hackett said.
Brazil was forecast to produce 54.5 million 60-kg bags of coffee in 2019/20, with 38 million bags of arabica and 17 million bags of robusta, the median estimates showed.
This would be down from a record 60 million bags in 2018/19, roughly made up of 43 million bags of arabica and 16 million bags of robusta, during the country's seasonally larger biennial crop.
"Trade wars could affect some flows of coffee to and from the US, especially processed coffee," said Carlos Mera, senior commodities analyst at Rabobank in London.
Another bullish factor is the "high chance" for the El Nino weather phenomenon to form this year, with the world's fourth-biggest coffee producer, Indonesia, already experiencing drier-than-usual conditions, Mera said.
Production in Vietnam, the world's second-biggest coffee grower, was pegged at 28.5 million bags in 2018/19, down from a record 29.5 million bags the prior year, International Coffee Organization data showed. Estimates ranged from 27 million bags to 32 million bags.
Global coffee supplies were forecast reaching a 5 million-bag surplus in 2018/19, with estimates ranging from balanced to a 14 million-bag surplus. In 2019/20, however, forecasts varied widely from a 5 million-bag deficit to a 10 million-bag surplus, with the median calling for a balance.
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