Arabica-Coffee Enters Bull-Market Territory

  NEW YORK--Arabica-coffee entered bull-market territory Tuesday, as concerns over how the steep

drop in price over the last two years would affect next season's supply buoyed prices.

  Arabica beans for delivery in March climbed as high as $1.2260 a pound on the ICE Futures U.S.

exchange. That brought coffee into bull-market territory, defined as a 20% rise from a recent low.

The contract was recently up 1% at $1.2210 a pound.

  In a report emailed Monday, Switzerland-based Volcafe Ltd., a unit of commodities trade house ED&F

Man Holdings Ltd., lowered a previous forecast for Brazil's crop next year by 15% to 51 million

60-kilogram bags.

  The projected drop in Brazil's output is due to poor flowering, the result of trees stressed from

two large crops, as well as farmers' decisions to heavily prune their trees, Volcafe said. Some

farmers chose to cut back their trees after coffee prices dropped 23% last year.

  A smaller crop in Brazil, the source of about one-third of the world's coffee, could temper fund

selling, analysts said. Last year, money managers held a record net-short position, or bets that

prices could rise, but they have been reducing those bets.

  Brazil's back-to-back bumper crops--along with higher production in neighboring Colombia, the

world's second-biggest arabica grower after Brazil--helped send prices down to seven-year lows in

November.