Coffee Rises to 13-Year High on Crop Concerns; Cocoa Climbs
By Chris Kay and Elizabeth Campbell - Oct 21, 2010 3:20 PM ET


Arabica coffee rose to a 13-year high in New York and robusta coffee reached the highest level since 2008 in London on concern that adverse weather in producing countries is curbing supply. Cocoa climbed.

Wet weather in Asia is delaying the harvest and processing of beans, said Rodrigo Costa, the vice president of institutional sales at Newedge USA LLC in New York. Rains in Central America have also kept supplies from “flowing out of the region,” he said. Colombia, the second-largest grower of arabica, said on Oct. 15 that a fungus is damaging plants and may reduce output next year.

“There are still big concerns” for South American crops, said Kona Haque, a London-based analyst at Macquarie Group Ltd. “Every time you hear of any supply downgrade or production disruption, that’s what’s causing prices to shoot up even more, because there’s just no room for error. It’s going to remain a volatile market.”

Arabica for December delivery rose 4.25 cents, or 2.2 percent, to settle at $2.01 a pound at 2 p.m. on ICE Futures U.S. in New York. Earlier, prices reached $2.035, the highest level for a most-active contract since Aug. 11, 1997.

Coffee output in Brazil, the world’s biggest producer, may be lower than forecast next year as growers prune trees to improve productivity, Carlos Besteti, manager of crop assessment at the Agriculture Ministry’s crop forecasting agency said in an interview.

Inventories Drop

Coffee stockpiles monitored by ICE totaled 1.84 million bags as of Oct. 19, down 40 percent this year.

Global arabica demand will exceed supply by 1.3 million bags in the year starting Oct. 1, Macquarie said last week in a report. The robusta deficit will be 1.6 million bags, it said. That matches the year-earlier shortfall. A bag weighs 132 pounds, or 60 kilograms.

Robusta gained as the government of Vietnam, the world’s biggest producer of the variety, said floods and heavy rain in central provinces left 54 people dead, 44 injured and 20 missing. Typhoon Megi, which left 19 people dead in the Philippines, moved into the South China Sea as it headed for the Chinese coast.

“A lot of people are seeing potential for lower Vietnamese exports,” said Doug Whitehead, an analyst at Rabobank International in London. “The super-typhoon Megi could also be inducing some pre-emptive buying in robusta.”

Rain Delay

Robusta futures for January delivery jumped $53, or 2.9 percent, to settle at $1,893 a metric ton on NYSE Liffe. Prices reached $1,910, the highest level since Oct. 14, 2008.

“Concern over delays to the new crop should rainfall persist” helped lift prices, along with the typhoon, Ralph Hawes, a coffee trader with Sucden Financial Ltd. in London, wrote in a note yesterday.

Robusta, used in instant coffee, is harvested mostly in Asia and parts of Africa. Arabica, grown mainly in Latin America, is favored for specialty beverages made by Starbucks Corp. and other coffee chains.

Cocoa in London gained after the pound fell to a six-month low against the euro, boosting the appeal of the raw material.

“I don’t see it as anything to do with supply and demand fundamentals, it’s much more a reflection of currency movements,” said Gary Mead, a London-based analyst at VM Group.

Cocoa futures for December delivery climbed 42 pounds, or 2.3 percent, to settle at 1,902 pounds ($2,987) a ton in London. In New York, cocoa futures for December delivery rose $40, or 1.4 percent, to $2,817 a ton.

Raw-sugar futures for March delivery fell 0.46 cent, or 1.6 percent, to settle at 28.35 cents a pound on ICE. In London, refined-sugar futures for December delivery dropped $6.70, or 0.9 percent, to settle at $723.90 a ton.

Sugar loading at Brazil’s two main ports is accelerating and lowering a backlog by half as dry weather allows vessels to speed up shipments, according to research firm Santos Associados Consultoria Ltda. and shipping agency Unimar Agenciamentos Maritimos.

To contact the reporters on this story: Chris Kay in London at ckay5@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Bloomberg News