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Gourmet Coffee May Cheapen, Helping Starbucks: Chart of Day

Mild-tasting coffee used by Starbucks Corp. and Green Mountain Coffee Roasters Inc. is poised to cheapen versus its bitter-tasting competitor as production of so-called arabica beans increases to a record.

The CHART OF THE DAY shows the premium of arabica over robusta widened 61 percent in the past year to $2,282.61 a metric ton as investors raised bets on concern rains in Colombia, the biggest grower of the variety after Brazil, would damage the crop. That’s almost double the average $1,286.13 a ton since January 2008, when a new contract started trading in London.

“The speculative premium on arabica should decline in the fourth quarter, as the upcoming harvests in Colombia and Central America should reduce current supply bottlenecks in high-quality arabica beans,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in an e-mailed response to questions.

The arabica coffee harvest will surge 14 percent to 85.95 million bags in 2010-2011, from a year ago, according to the U.S. Department of Agriculture. That would be more than double the 6.4 percent expansion for robusta beans, according to the USDA. Stockpiles in warehouses monitored by ICE Futures U.S. fell 41 percent in the past year to 1.97 million bags, the lowest level in more than a decade.

Colombia’s main harvest begins in October, according to the USDA, which forecast the nation will represent 10 percent of the world’s global arabica output in 2010-2011. Total coffee production will exceed demand by 8.2 million bags in 2010-2011, compared with a deficit of 3 million bags in the prior season, according to USDA data. Each bag weighs 60 kilograms.

“The extreme nature of the cost increases has made it untenable for us to continue” to absorb them, Starbucks said Sept. 22, when it announced an increase in some prices. Additional commodity costs, primarily from coffee, will be about 4 cents a share in the year ending in September 2011, the Seattle-based company said in August while affirming its July 21 forecast for the period of $1.36 to $1.41 a share.

(To save a copy of the chart, click here.)

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