Hedge funds started pulling out of their bearish coffee bets just in time to escape being squeezed by the biggest rally in 11 weeks.
Investors who were the most negative on prices since December 2013, retreated from their net-short position before futures posted seven straight gains through June 4. Signs that supplies won’t be as plentiful as some analysts had expected sparked a 9 percent rebound from this year’s low in late May.
While rains in the first quarter spurred speculation that Brazil’s trees would recover from last year’s drought, farmers found smaller-than-expected beans when the harvest started in May. Analysts have started cutting their estimates for output in the country, the biggest grower and exporter, exchange-monitored stockpiles are near the lowest level since September 2012, and exports are declining from Costa Rica and Peru.