Coffee Arabica gained 4.95% over the week, making it one of the best-performing soft commodities.
 
Arabica outperformed its soft peers on a year-on-year basis as well, posting gains of approximately 83%. The rally was driven by a combination of strong demand and tight supply conditions. More recently, Arabica has been gaining on speculation that production will fall short of demand, after severe frost in Brazil’s coffee-growing areas in June risks hurting next year’s harvest. Brazil is the world’s biggest producer and exporter of Arabica coffee. However, recent reports seem to suggest that the frost did not cause as much damage as originally anticipated, and that warmer weather conditions should favour harvesting.
 
Forecaster Somar Meteorologia recently told Bloomberg that favourable weather in the coffee-producing regions of Brazil will help completion of the harvest and drying of beans. At this juncture, many analysts are speculating that the high price of Arabica will encourage Brazilian growers to increase the total harvest area for next year. This may consequently prompt traders to sell Arabica on the view that supply conditions will ease.