Coffee Prices Soar as Dry Weather in Brazil Persists

Alexandra Wexler

     NEW YORK--Coffee prices surged to 13-month highs Tuesday morning after weekend rains in the

growing areas of Brazil did little to ease the dryness.

     "We expected to see larger beneficial rains," said Sterling Smith, a futures specialist at

Citigroup in Chicago. "The vast majority of the coffee areas are going to be left fairly hot and

fairly dry."

     A dry spell in No. 1 coffee grower and exporter Brazil is affecting plant development and has

pushed arabica-coffee prices more than 30% higher this year. Traders worry about production losses,

although there isn't a shortage of coffee globally.

     Arabica coffee for delivery in March on the ICE Futures U.S. exchange was recently 6.1% higher

at $1.4840 a pound, while the more-active contract for May delivery was up 5.9% at $1.5075 a pound.

The May contract reached $1.5665 a pound in early trade, the highest level since Jan. 18, 2013.

     "I don't think there's really anything here to stop the coffee (moving higher) until we see how

big the damage will be" to output, Mr. Smith said. "If (the dry weather) gets worse, we're on our

way to $2."