Arabica-Coffee Futures Rise as Investors Evaluate Demand

  NEW YORK  -  Arabica-coffee futures climbed to 7 1/2-week highs on Friday

morning, buoyed by short-covering and the idea that a near-term shortage of

robusta beans could drive up demand for arabica.

  Traders said growers in top-robusta producer Vietnam have been holding back

their beans, waiting for higher prices, despite harvesting a bumper crop. That

has pushed prices for robusta on London's Liffe exchange to 3 1/2-month highs

this week.

  The gap between the price of arabica, which is prized for its mild flavor and

typically used in gourmet blends, and more-bitter tasting robusta beans, an

instant-coffee staple, narrowed last week to a five-year low of 27.945 cents a

pound. On Friday, the spread had widened slightly to 31.942 cents a pound.

  "We expect weak arabica price outlook and subsequently narrow arabica/

robusta spread to drive higher arabica blends in 2014, and consumption is

forecast to rise by 1.6% year-on-year--the largest increase since 2007-08,"

Rabobank said in a note.

  But regardless, "arabica-coffee prices are expected to ease throughout 2014

on a third year of surplus production and producer currency weakness," which

encourages exports, Rabobank said.

  The bank expects arabica prices to average 95 cents a pound in the fourth

quarter of 2014.

  Arabica coffee for delivery in March on the ICE Futures U.S. exchange was

recently up 1.6% at $1.1305 a pound, down from an intraday high of $1.1360, a

high since Oct. 21.