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In: Finance

Brazil, the world's largest coffee producer, recently announced that it is expecting a record harvest.

Brazil, the world's largest coffee producer, recently announced that it is expecting a record harvest. How would you expect this announcement to impact coffee futures prices?

Solutions

Expert Solution

If the supply is more than the expected supply then the price of the commodity will go down.

If the production of coffee is expected a record harvest then the supply is more than the demand, hence this announcement will impact the futures price of coffee in a negative manner i.e the coffee futures will drop/decrease/decline.  

The majority of the impact will be seen in the short term future contracts as coffee is a food item its overproduction will adversely affect the short term prices of coffee.

Answer: B Futures prices will fall, especially short-term futures prices.  

jeff jeffy answered 2 years ago
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