Arabica Coffee Falls to 4 1/2-Year Low

WSJ - Leslie Josephs

   Arabica-coffee prices are at their lowest level in 4 1/2 years, raising

concerns that farmers might soon give up growing the beans.

  Coffee for delivery in December fell 4.8% to finish last week at $1.0910 a

pound, the lowest since March 11, 2009. Traders said the start of harvests in

Colombia and Central America, right after Brazil, the top grower, is estimated

to have reaped a large crop, pushed prices down.

  The decline marks the latest low point in a slide in prices that has lasted

more than two years, dismaying farmers. Earlier this year, Colombian farmers

blocked roads in protest, and the Brazilian government agreed to buy coffee to

support prices.

  "It's kind of depressing down here," said Demilson Batista, sales director of

producer Legender Specialty Coffees, in the Minas Gerais state in Brazil. Mr.

Batista scrapped plans earlier this year to expand his 100-hectare (247-acre)

farm, and he said he is considering cutting some of his plants next year.

  "A lot of producers are already giving up," he said. "Smaller and mid-sized

producers will just [get down on] their knees and pray."

  Brazil is the source of one-third of the world's coffee beans. Last year,

growers reaped a record 50.8 million 60-kilogram (132-pound) bags and Brazil's

government crop forecaster Conab expects this year's crop to be 47.5 million

bags, a record "off-year" harvest.

  Coffee trees produce fruit in two-year cycles, with one harvest larger and

the next year's crop smaller.

  Colombia, the No. 2 arabica grower, which had been battling a devastating

coffee-plant fungus, is expected to increase production by a third this year

compared with a year ago, to about 10.5 million bags, after farmers planted

more disease-resistant varieties, according to Luis Fernando Samper, chief

marketing officer of the Colombian Coffee Growers Federation.

  "It continues to be difficult because prices keep falling," Mr. Samper said.

  Sterling Smith, a futures specialist at Citigroup in Chicago, said

arabica-coffee prices could fall to $1 a pound by the end of this week.

  "It can happen that quick because there's not a lot of reason to buy here,"

Mr. Smith said. Supplies are plentiful, and roasters are confident they can get

the beans whenever they need them, he said.

  In Central America, roya, the fungal disease that hit Colombia, is reducing

production, eroding profitability for farmers by leaving them with less to sell

at the current low prices.

  Eladio Sanabria Garita, general manager of Beneficio La Eva, an exporter in

Costa Rica, said he will probably have about 20% less coffee to export this

year.

  The farmers' losses are "very worrying," Mr. Sanabria Garita said. By next

year, he said, he could "be seeing them abandon their farms."