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Starbucks-Favored Coffee Premium Declines to Lowest Since 2009

Starbucks-Favored Coffee Premium Declines to Lowest Since 2009
A worker sieves harvested arabica beans, used in specialty coffees, into a bag at Ponto Alegre's farm in Cabo Verde, Brazil. Photographer: Paulo Fridman/Bloomberg

Feb. 8 (Bloomberg) -- Arabica coffee, favored by Starbucks Corp., is fetching the smallest premium over the robusta variety in more than three years as supplies increase from Central America and Brazil, the world’s top grower.

Arabica was 44.7522 cents a pound more costly than robusta, the lowest since March 30, 2009. Inventories of arabica beans have climbed to the highest since 2010 while stockpiles of robusta, used in instant coffee, are down 75 percent from a record in July 2011. Robusta-coffee futures in London touched a four-month high, while arabica in New York extended a slump to a 32-month low.

Brazil will harvest the largest ever crop for a lower-yielding half for a two-year production cycle, the government estimates. In Colombia, the second-biggest arabica grower, output will climb 30 percent, an industry group said yesterday. Shipments from Honduras and Guatemala climbed in January from a year earlier, industry groups said this month.

“You are looking at a quite massive off-year crop from Brazil, which obviously limits the upside,” Andrea Thompson, the Belfast, Northern-Ireland-based head of research and analysis at CoffeeNetwork, a unit of broker INTL FCStone Inc, said by telephone. “You’ve also had quite good, strong flows of exports from Latin America.”

Robusta-coffee futures for March delivery climbed 1.2 percent to close at $2,123 a metric ton at 5:34 p.m. in London on NYSE Liffe, after reaching $2,145, the highest since Oct. 5. Arabica coffee for March delivery rose 0.5 percent to settle at $1.4105 a pound on ICE Futures U.S. The price touched $1.394, the lowest since June 2010.

Tet Holiday

As of Feb. 4, stockpiles of robusta coffee in NYSE Liffe-monitored warehouses were 102,410 tons, down 3 percent from two weeks earlier, the latest exchange data show. Supplies may continue to tighten as farmers in Vietnam, the top grower, slow shipments before the festival celebrating the Lunar New Year, known as Tet.

Producers who have been holding back beans looking for higher prices, may increase “retention” after Tet, Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd., said in a report e-mailed Jan. 25. Sales prior to Tet were about 40 percent of the crop, less than 45 percent a year earlier, the median estimate in a Bloomberg survey of eight traders and shippers published on Feb. 1 showed.

“The principal hedging origin, Vietnam, is now heading into holiday season,” ABN Amro Markets U.K. Ltd. said in a report e-mailed today. “This does not completely remove selling but means it may be more sporadic over the next week or so.”

Also on ICE, raw-sugar futures for March delivery slid 0.1 percent to 18.14 cents a pound, after touching 18.03 cents, the lowest since August 2010. Cocoa futures for May delivery dropped 0.4 percent to $2,227 a ton in New York.

Orange-juice futures for March delivery fell 0.5 percent to $1.2055 a pound on ICE, while cotton futures for delivery in March climbed 1.6 percent to 82.67 cents a pound.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

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

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