Coffee Futures Tumble to More Than Seven-Year Low; Sugar Slips

DJones - Leslie Josephs

  NEW YORK  -  Arabica-coffee prices slid to the lowest level in more than seven

years as growers in Central America and Colombia bring in their harvests amid

tepid demand from roasters.

  Arabica coffee for delivery in December fell 1.9% to $1.0150 a pound, the

lowest close for the most actively traded contract since Sept. 14, 2006, on the

ICE Futures U.S. exchange.

  Prices for arabica beans, which comprise the majority of world production,

have tumbled 29% this year as a second bumper crop from top grower Brazil hit

international markets. The latest drop is fueled as the harvests from Central

America and Colombia add to already ample supplies.

  The International Coffee Organization, a London-based trade group, expects

global arabica-coffee supplies to outpace demand by four million bags in the 12

months that began Oct. 1.

  The price drop for arabica has rattled growers, who say they are producing

the coffee at a loss. The ICO estimates the cost of producing one pound of

arabica coffee beans in Colombia and Central America is $1.10 to $1.15.

  "This year will be the second year in a row that we will have operational

losses," said Juan Pablo Echeverri, who farms 200 hectares of coffee in

Manizales, Colombia. "At these prices, the effects on the state of the coffee

plantation will be disastrous."

  Also driving prices lower are expectations of another big crop from Brazil

again next year. Flowering, an indication of the size and health of next

season's crop, has begun. "The flowering in Brazil was very good," said

Christian Wolthers, president of Wolthers America, a Florida-based importer of

central American and Brazilian coffee.

  But despite the price drop, roasters aren't rushing to buy beans.

  "The incentive isn't there to buy out too much," said Tom Isaia, president of

Coffee Express Co., a roaster based in Plymouth Township, Mich. "There's risk

involved."

  If prices fall further, roasters could be stuck with more expensive stock,

Mr. Isaia said.

  "If we knew that in September of 2014 coffee would be 40 cents more a pound,

you'd see everybody stumbling all over each other to buy some," he said.

  In other markets, raw sugar for March delivery fell 0.9% to 18.10 cents a

pound, the lowest settlement since Sept. 27.

  "The main pressure seems to have been the weakening real," said Michael

Liddiard, senior vice president at New York-based Agrilion Commodity Advisers

LLC. The Brazilian currency hit an eight-week low against the U.S. dollar in

intraday trade Wednesday.

  The weaker currency in Brazil, the No. 1 sugar and coffee grower, encourages

exports of the commodities because producers receive more reais back for their

crops sold abroad in U.S. dollars.

  Orange juice for January delivery ended up 1.2% at $1.2475 a pound, the

highest settlement since Oct. 14. Cocoa for delivery in December closed 0.2%

lower at $2,730 a ton, while cotton for December delivery settled 1.5% higher

at 77.07 cents a pound.