Arabica Coffee Surges 4.4%; Cold Weather Boosts Orange Juice

  NEW YORK - Arabica-coffee futures surged 4.4% Friday as index-tracking funds and other investors

added to bets that prices would rise.

  Money managers bought coffee futures after prices fell to near-three-week lows this week and ahead

of annual index-fund reweighting, which begins next week, traders said.

  Funds that track indexes "should be coming into the market (next week) and buying up about 11,000

lots over five days" as they rebalance their positions to align with changes to the indexes, said

Beto Taguchi, a senior trader at Ally Brazilian Coffee Merchants. But Mr. Taguchi said selling from

producing countries would likely cap the rally before it can reach $1.20/lb., a key technical and

psychological level.

  "The funds have to increase their position in coffee" as they rebalance, said Hernando de la

Roche, senior vice president at INTL FCStone in Miami.

  Currency moves added to coffee's gains, Mr. de la Roche said, as the Brazilian real was gaining

strength, "so the selling from Brazil is being discouraged right now."

  A stronger real discourages exports of coffee from the No. 1 grower because producers receive less

of the Brazilian currency for their crops sold abroad in U.S. dollars. The real weakened to

four-month low of 2.4082 reais against the dollar in intraday trade Thursday but then strengthened

Friday, recently trading at 2.3768 reais per dollar, according to CQG.

  Arabica coffee for March delivery on the ICE Futures U.S. exchange ended 4.95 cents higher at

$1.1635 a pound Friday, a one-week high.

  But traders aren't confident that the rally will last, as the market is still dealing with a glut

of supply.

  Back-to-back bumper crops from Brazil and a recovery in production from neighboring Colombia, the

world's No. 2 arabica grower, helped push prices to more than seven-year lows last year. In

addition, global output of all coffee rose 7.8% in the season ended Sept. 30 from the previous

harvest, according to the International Coffee Organization.

  "The market always comes back to fundamentals, and I think it will at some point," Mr. Taguchi

said, citing $1 to $1.05 a pound as a potential target for the near term.

  Orange-juice futures also rose Friday, touching a one-week high in intraday trade, as the National

Weather Service forecast that temperatures in parts of No. 1 orange-growing state Florida could drop

toward freezing on Monday and Tuesday nights.

 But industry experts say temperatures would have to fall below 28 degrees for about four hours

before any damage would be done, a scenario that looks unlikely, according to forecasts.

Orange juice for March delivery on ICE settled 1.3% higher at $1.3975 a pound.

  A freeze that damages output this year could have an exaggerated impact on supplies, because the

U.S. Department of Agriculture is already predicting the smallest Florida orange crop in 24 years.

  In other markets, cocoa for March delivery ended 2.4% higher at $2,699 a ton, nearly reversing the

previous session's steep losses, and cotton for delivery in March settled at a one-week low of 82.94

cents a pound, down 1.3% on the day. Raw sugar for delivery in March closed down 1.3% at 16.08 cents

a pound, the lowest settlement since Dec. 18.