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?

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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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