Coffee Prices Fall Following Brazil's Election Results, Weakening the Real and Boosting Export Prospects – CoffeeTalk

Coffee prices slumped following President Luiz Inácio Lula da Silva’s surprise election win in Brazil, which caused the nation’s currency to weaken and boosted export prospects.

Lula’s victory, a political upset, led to a projected 12% plunge in the Brazilian real against the dollar. A weaker real enhances the competitiveness of Brazilian produce, encouraging exports as farmers receive more local currency for their crops. As Brazil is the world’s biggest exporter of coffee, this currency depreciation is bearish for prices.

Arabica coffee futures dropped as much as 3.3%, while Robusta fell to a two-year low when trading opened on Monday.

This move is a “simple technical reaction” to the expected currency shift, according to Arnaud Lorioz, chief executive officer of Paris-based brokerage Deepcore. “The market is saying the real will favor more exports from producers in Brazil.”

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