Coffee futures rise to 25-month high on global deficit forecast

June 24, 2014

NEW YORK – Coffee futures rose to a 25-month high as concerns mounted that the global market will swing to a deficit after a drought in the first quarter ravaged crops in Brazil, the world’s biggest producer and exporter.

In the year starting Oct. 1 in most countries, world production will trail demand by 7.1 million bags, Marex Spectron, a London-based brokerage, said in a report. That would mark the first shortfall in five years, U.S. government data show. Heavy rain this weekend may delay the harvest in some parts of Brazil, Commodity Weather Group said Wednesday.

Through Wednesday, arabica futures surged 83 percent this year, the biggest gain among 24 raw materials tracked by the Standard & Poor’s GSCI Spot Index. The rally may boost costs for the premium-quality beans at Starbucks Corp. and J.M. Smucker Co., the maker of Folgers, the best-selling brand in the U.S.

“Concerns about the supply outlook are deepening,” Jack Scoville, a vice president for Price Futures Group in Chicago, said in a telephone interview. “This problem is probably going to last more than one season.”

Arabica coffee for May delivery climbed 2.9 percent to $2.079 a pound at 1:20 p.m. on ICE Futures U.S. in New York. Earlier, the price reached $2.10, the highest for a most-active contract since Feb. 14, 2012. The commodity headed for the sixth straight gain, the longest rally in two months.

Brazil’s crop prospects may suffer for “at least three years,” Judy Ganes-Chase, the president of J. Ganes Consulting in Panama City, Panama, said in an email. “The trees will not be able to immediately rehydrate after being starved of nourishment. Trees will also be more susceptible to disease, and there will be things that are not apparent now that will manifest down the line.”

In 2013, futures dropped 23 percent, capping a three-year slump of 54 percent. The rout was the longest since since 1993 amid bumper crops in Brazil. That prompted many growers to curb investments and cut fertilizer use, while Central American harvests have been hampered by leaf-rust disease.

“There’s no problem with physical availability in calendar year 2014, but significant risks threaten 2015-2016,” Marex said, citing an El Niño weather event that may soak Brazil by mid-year and leaf rust.

Stockpiles of robusta coffee monitored by London’s NYSE Liffe have fallen to the lowest since at least 2002.

Through Wednesday, robusta futures climbed 27 percent this year. The beans are used in instant coffee.

The arabica premium to robusta has more than tripled this year and headed for the highest since March 2012, data compiled by Bloomberg show.

Commodity Weather Group, based in Bethesda, Maryland, said that a dry pattern starting in a week may reduce potential crop damage from rain in Brazil.

In the previous two seasons, the accumulated global coffee surplus was 9.65 million bags, Marex said.

A bag weighs 60 kilograms or 132 pounds.

© 2014, Bloomberg News

You may be interested

Strong winds cause three deaths in Costa Rica, one in El Salvador
Weather
1100 views
Weather
1100 views

Strong winds cause three deaths in Costa Rica, one in El Salvador

AFP - December 10, 2017

Three people have died in Costa Rica, includiing two Swiss tourists, and one in El Salvador as a result of…

6 camouflaged Costa Rican creatures you probably haven’t seen
Environment and Wildlife
2006 views
Environment and Wildlife
2006 views

6 camouflaged Costa Rican creatures you probably haven’t seen

Lindsay Fendt - December 9, 2017

The jungle can be a scary place, and even for some of the fiercest of Costa Rica’s creatures, sometimes the…

National Geographic-Lindblad Expeditions ship makes first visit to Osa Peninsula
Cruises
1924 views
Cruises
1924 views

National Geographic-Lindblad Expeditions ship makes first visit to Osa Peninsula

The Tico Times - December 8, 2017

National Geographic and Lindblad Expeditions touched down for the first time on Costa Rica's renowned Osa Peninsula this week for…