It’s the Biggest Commodity Loser in ’15 Because of Real Collapse

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Premium coffee beans are losing their luster after the slumping currency in Brazil, the world’s top producer, tumbled against the dollar, spurring exporters to boost sales priced in the greenback.

On ICE Futures U.S., arabica coffee for September delivery fell 2.8 percent to settle at $1.2155 a pound at 1:30 p.m. in New York. Earlier, the price touched $1.211, a 17-month low. The commodity posted the seventh straight decline, the longest slump since October 2013. The real has plunged 33 percent in the past 12 months.

This year, coffee has tumbled 27 percent -- more than oil, gold or copper among the 22 prices in the Bloomberg Commodity Index. In the season ended June 30, Brazil’s bean exports surged to a record. On Thursday, the nation cut its target for a budget surplus, adding to concern that its credit rating will be reduced. In Colombia, the second-biggest arabica producer, the peso has dropped 16 percent in 2015.

“With producing-country currencies getting weaker against the dollar, that just makes coffee prices higher” for growers, Rodrigo Costa, the director of the coffee desk at Societe Generale in New York, said in a telephone interview.

On July 13, Kraft Heinz Co. cut retail prices by 5.8 percent for Maxwell House and Yuban roast and ground coffees. J.M. Smucker Co., the maker of Folgers coffee, reduced prices by 6 percent on July 1.

Brazil’s coffee exports increased even after trees were hurt last year by drought, signaling suppliers are accelerating sales from stockpiles. In the first half of 2015, Colombia’s exports rose 10 percent from a year earlier.

Robusta Spread

Arabica, favored by Starbucks Corp., has dropped to a premium of 46.2 cents a pound against robusta beans used in instant brands. That’s the lowest since March 3.

This year, the premium has slumped 42 percent after doubling in 2014 because of the Brazilian drought.

Robusta futures for September delivery declined 1.2 percent to close at $1,661 a metric ton (75.34 cents a pound). The price has dropped 13 percent this year. Vietnam is the top producer.

“We expect to recognize lower green coffee costs as we proceed through the year, which we have begun passing on to our customers and consumers in the form of lower price points on the Folgers mainstream offerings,” Vince Byrd, vice chairman of Orrville, Ohio-based J.M. Smucker, said in a presentation to investors on June 10.

On Thursday, the Bloomberg Commodity Index extended a slump to a 13-year low. Nickel has dropped 25 percent, the second-biggest loser.

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