Coffee Climbs to Five-Month High as Brazil Crop Concerns

Arabica-coffee futures reached a five-month high as a Brazil drought that already shrunk this year’s crop and sent prices up almost 90 percent in 2014 is threatening next season’s output.

Plants are entering the main-flowering stage that will produce beans for harvesting beginning in May, and the trees will probably be hurt by a two-week dry spell this month, according to Marco Antonio Santos, a crop forecaster at Somar Meteorologia. A persistent lack of moisture means that some of the damage to the crop is already irreversible, Cepea, a University of Sao Paulo research group, said yesterday, citing the results of its survey.

The drought in Brazil, the world’s biggest grower and exporter, is raising costs for roasters including Starbucks Corp. The nation’s shrinking harvest coupled with rising consumption will leave a global production deficit of as much as 10 million bags this season, the International Coffee Organization in London said Aug. 1. The shortfall will extend into next year, according to Stefan Uhlenbrock, a senior commodity analyst at F.O. Licht.

“News over the last couple of days on how beat up the coffee crop really is is helping people reanimate the market,” Hector Galvan, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “The market may start realistically pricing in the damage that we’ve seen reported out of South America.”

Arabica coffee for December delivery climbed 4.1 percent to settle at $2.086 a pound at 1:36 p.m. on ICE Futures U.S. in New York, after touching $2.1375, the highest for a most-active contract since April 25. Trading was 89 percent more than the 100-day average for this time, according to data compiled by Bloomberg.

Smaller Crop

Brazilian farmers have finished collecting beans for this season that were damaged by dry weather in the first quarter, and the harvest will probably be smaller than estimated by the U.S. Department of Agriculture, Judy Ganes-Chase, president of J. Ganes Consulting in Panama City, Panama, said Sept. 30. The crop will shrink further next year, she said.

Growers in the country had already sold 44 percent of the crop by Aug. 31, compared with 32 percent a year earlier, Porto Alegre, Brazil-based research firm Safras & Mercado said Sept. 22. The pace signal that producers may run out of supplies from the recent harvest.

The Brazil woes come as plantings in Central America, Mexico and Peru struggle to recover from a crop disease called leaf rust that cut yields across the region in the past two years.

Shipments from Honduras, the largest grower and exporter in Central America, fell 3.5 percent from a year earlier to 4.187 million bags in 12 months ended Sept. 30, Jenny Bustamante, head of statistics and exports at the Honduran Coffee Institute, said yesterday in telephone interview from Tegucigalpa. Each bag weighs 60 kilograms, or 132 pounds.

The Costa Rican Coffee Institute said yesterday that exports slipped to 29,167 bags in September from 37,672 bags a year earlier.

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