Arabica-coffee futures fell to the lowest in more than a year amid signs of increasing global supplies and improved crop prospects for Brazil, the world’s biggest producer.
In the season starting Oct. 1 in most countries, output will probably be 154.5 million bags, up 1.7 million bags from a February estimate, Keith Flury, head of coffee research at Winterthur, Switzerland-based Volcafe, wrote in e-mailed report. The analyst also boosted the forecast for the current season by 1.6 million bags as Brazil recovers from a drought last year, and cut the outlook for demand.
In 2014, parched Brazilian crops sent arabica futures surging 50 percent in New York, the biggest gain among 22 raw materials tracked by the Bloomberg Commodity Index. Arabica, favored by specialty roasters such as Starbucks Corp., is the worst performer in the index this year, as ample rains boost the outlook for South American harvests.
“There’s going to be a lot more supply in Brazil and the world than anyone had expected,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “That’s pushing prices lower.”
Arabica coffee for July delivery slumped 5.6 percent to settle at $1.2845 a pound at 1:30 p.m. on ICE Futures U.S. in New York, after dropping to $1.2785, the lowest since Feb. 3, 2014. The drop was the largest for a most-active contract since March 3, and extended a rout in the past year to 29 percent.
Losses accelerated after prices broke support at about $1.29, and the technical breakdown points to a decline to as low as $1.25 in the next few days, Smith said.
Volcafe predicts Brazil will collect 51.9 million bags in 2015-2016, up from 49.2 million a year earlier. That will help world output of all coffee varieties top use by 1.3 million bags, compared with a deficit of 6.4 million in 2014-2015.
Volcafe is ED&F Man’s coffee unit. A bag weighs 60 kilograms or 132 pounds.
In London, robusta coffee, used widely for instant drinks by companies such as Nestle SA, slid 2.5 percent to $1,682 a metric ton on ICE Futures Europe.