The future price fell to $169 from $215, the maximum price reached in April, after it was proven that the damage to crops caused by drought in Brazil was not as severe as anticipated.

Contrary to what was estimated a few months ago, the damage done to the coffee plantations in Brazil was not so serious as to drastically affect the final production of the 2013-2014 harvest. Because of this, analysts believe that prices will tend to fall in the medium term, in response to a global supply that is higher than projected.

Bloomberg reports that “future prices have plummeted 21% since the peak reached in April, partly due to excess stock in the United States which helped minimize the impact of lower global production caused by drought in Brazil. Supplies this year could reach 50.5 million bags, estimates Mercon Group, exceeding estimates by the U.S. government in May of 49.5 million”.

“The forecast for higher production ‘suggests that the damage was not as significant as expected,’ said Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago. ‘Also we are in the middle of the harvest and conditions are adequate, unchanged.'”

Source: Bloomberg.com