Coffee Tumbles as Colombia Boosts Exports in Response to El Ninoby
Government aids farmers after drought conditions bake beans
As much as 18% of current crop is lower-quality coffee
Coffee futures fell the most in seven months after Colombia announced measures that will increase exports, spurred by the plight of farmers in the country who are dealing with drought conditions linked to the El Nino weather pattern.
The National Committee of Coffee Growers will relax restrictions on purchases from growers to boost exports, it said late Thursday in a statement. As much as 18 percent of the current crop is lower quality, compared with a typical level of about 10 percent, it said.
The nation is the third-largest coffee producer, behind Brazil and Vietnam. Brazil and Colombia are the biggest exporters of arabica beans, which are brewed by companies including Starbucks Corp. Robusta is used in instant coffee.
The extra supply of Colombian beans “will compete with others in Central America and other areas,” Hernando de la Roche, a senior vice president for INTL FCStone in Miami, said in a telephone interview. “As a roaster, you’d prefer buying lower grades from Colombia than competing qualities, or even some robusta.”
On ICE Futures U.S. in New York, arabica coffee for December delivery tumbled 5.9 percent to close at $1.2585 a pound, the biggest drop for a most-active contract since March 3. The price has slumped 24 percent this year as the Brazilian real’s plunge against the dollar boosted the appeal of exports priced in the greenback.
Arabica posted the largest decline among 22 raw materials in the Bloomberg Commodity Index.
In London, robusta coffee for January delivery fell 2.5 percent to $1,619 a metric ton (73.44 cents a pound) on ICE Futures Europe. The price has dropped 16 percent this year.
The arabica premium to robusta plunged 10 percent to 52.41 cents a pound, the biggest drop since March 3. That value has tumbled 34 percent this year.