Coffee Gains Most in 8 Weeks on Supply Risk; Orange Juice RisesMarvin G. Perez
Arabica-coffee futures rallied the most in eight weeks on speculation that a possible strike by farmers will disrupt supplies from Colombia, the world’s second-biggest grower. Orange juice rose.
Producers in the Caldas region of Colombia will meet July 3 to decide whether to stage protests to demand higher subsidies from the government after prices dropped below the cost of production, Oscar Gutierrez, a regional coordinator for a growers group, said yesterday in a telephone interview. As of June 18, money managers were the most-bearish on prices since March, government data show. Futures have tumbled 15 percent this year amid ample supplies.
The potential “strike in Colombia is supporting prices because it could disrupt exports,” Hernando de la Roche, a senior vice president at INTL FCStone in Miami, said in a telephone interview. Hedge funds may be forced to close out bets that prices will fall, he said.
Arabica coffee for September delivery climbed 2.9 percent to settle at $1.219 a pound at 2 p.m. on ICE Futures U.S. in New York, the biggest gain since May 2. Trading was 38 percent below the average for this time in the past 100 days, according to data compiled by Bloomberg.
Production costs in Colombia are currently estimated at $1.60 a pound, while Central American growers can farm coffee for $1.45 a pound, according to Kona Haque, a London-based analyst at Macquarie Group Ltd., Australia’s biggest investment bank. Brazil is the largest producer and exporter.
From Oct. 1 through June 24, the Colombian government gave a total of 411 billion pesos ($213 million) in subsidies to producers, according to data from the country’s National Federation of Coffee Growers, or Fedecafe. The funds reached 288,745 of the nation’s 560,000 farmers, Martha Sanchez, a spokeswoman at the Federation, said in a telephone interview from Bogota.
Orange-juice futures for September delivery added 0.4 percent to $1.2825 a pound, snapping an eight-session slump.