Coffee Climbs to the Highest Price Since 1997 on Supply Concern
Coffee rose to the highest price since 1997 in New York and reached a 28-month high in London on signs that supplies will fail to keep up with demand.
Stockpiles monitored by the New York Board of Trade fell to 1.64 million bags for Jan. 27, the exchange said the next day. Colombia’s National Federation of Coffee Growers said Jan. 21 the harvest in Antioquia, the largest producing region, may drop below last year’s levels after excess rains. Exports from Vietnam may fall this month, statistics showed on Jan. 27.
“The market expects a reduced mid-crop in Colombia due to rain in 2010, and now rainstorms in Brazil that may impact production are being focused on,” said Keith Flury, an analyst with Rabobank in London. “With outlook tight, any potential reduction in the harvest is likely to result in notable price movements, and the increases in the last couple of sessions reflect this.”
Arabica coffee for March delivery advanced 5.35 cents, or 2.2 percent, to $2.5035 a pound at 8:24 a.m. on ICE Futures U.S. in New York after reaching $2.5075, the highest level since June 1997. Robusta coffee for March delivery climbed $58, or 2.7 percent, to $2,187 a metric ton on NYSE Liffe in London after touching $2,204, the highest price since Sept. 25, 2008.
Colombia, the second-largest grower of arabica beans, produced 8.9 million bags of coffee in 2010, down from the 12 million bags initially forecast, Eugen Weinberg, an analyst at Commerzbank AG, said in a report today.
“The high humidity and fungal disease also cast their shadow on the crop expected in 2011,” he said.
At the same time, unfavorable weather conditions have affected output in Vietnam, the world’s biggest grower of the robusta variety.
“Given the continued robust demand trend in the emerging countries especially and the already sharp fall in inventories, everything suggests that coffee will sustain a high price level in the longer term too,” Weinberg said.
Raw sugar for March delivery fell 0.43 cent, or 1.3 percent, to 33.51 cents a pound in New York. White, or refined, sugar for March delivery dropped $7.70, or 0.9 percent, to $806.70 a ton on NYSE Liffe.
“Optimistic forecasts for the ongoing sugar harvest in India are increasingly confirmed by actual data,” Commerzbank’s Weinberg said. By mid-January, production was up 15 percent from a year earlier at 8.4 million tons, according to the bank.
Stockpiles in Egypt
India released 1.62 million tons of sugar for open-market sale in February, the food ministry said today. The country is the world’s second-largest sugar producer after Brazil.
Egypt’s public companies have enough sugar stockpiles for three months, Ramadan Suleiman, a purchasing manager at state- owned Sugar and Integrated Industries Co., said by phone today. The country may tender to buy sugar in the second half of February, he said. As many as 150 people have died in Egypt in a week-long uprising against President Hosni Mubarak.
Indonesian state plantation firm PT Perkebunan Nusantara X failed to buy 90,000 tons of white sugar in a tender today, and Perkebunan Nusantara XI failed to buy 23,700 tons of the sweetener.
Cocoa for March delivery added 0.7 percent to $3,301 a ton on ICE. Cocoa for March delivery gained 0.3 percent to 2,170 pounds ($3,453) a ton on NYSE Liffe. Prices climbed last week for a third week in both markets on concern that political unrest in Ivory Coast, the world’s biggest producer, may crimp supply.
Declines are in store as soon as tensions ease in the West African nation, according to Commerzbank. Incumbent President Laurent Gbagbo refuses to stand down in favor of Alassane Ouattara, who is internationally recognized as the winner of an election in November.
“We still expect prices to fall to $2,800 a ton by year end,” the bank said.
Hedge funds and money managers almost doubled their net- long positions, or bets on rising prices, in the week ended Jan. 25 to 15,366 futures and options contracts, U.S. Commodity Futures Trading Commission data showed on Jan. 28. That was the highest level since early August.
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