(Bloomberg) -- Arabica coffee futures hit the highest since late 2022 on increased demand and as a bullish turn from investors triggered short covering. 

“Dealers have been caught short and forced to cover while funds have been adding long positions,” said Hernando De La Roche, a senior vice president at StoneX Financial Inc. Importers may have been forced to lift hedges, he added. 

The most active futures contract climbed as much as 2.9% on Friday, to the highest in 17 months. Prices are heading for a gain of more than 12% this week, the most since July 2021.

Demand for the premium arabica bean is expected to continue to benefit from tightness in supplies of the robusta variety, used in instant coffee. Hot and dry weather in Vietnam, the world’s largest producer of robusta, threatens to hurt output for the next season. 

In top arabica producer Brazil, “local roasters have shown significant interest” in buying some of the lower quality beans, brokerage firm Flavour Coffee said in a report. Those beans are already trading at lower prices than robusta in the local Brazilian market, and roasters are using them as a replacement for robusta in blends. 

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