Coffee's Big Moves Gives Some Traders the Jitters -- WSJ Blog

Leslie Josephs

  And the best agricultural commodity drama of 2014 goes to ... arabica coffee. (Cut to shot of

devastated frozen orange-juice concentrate market in tears.)

  Since the start of 2014, the arabica-coffee futures market posted daily moves of at least 4% on

six days. Other farm commodities like corn, cotton, sugar, soybeans or even orange-juice

concentrate, which is notorious for wintertime price swings, haven't moved 4% or more once this

year.

  Arabica-coffee prices have erased all almost all of last year's losses, as record heat and dry

weather in top coffee grower Brazil has fueled a 26% rally in 2014.

  Brazil is the source of around one-third of the world's coffee and the inclement weather and

damage is expected to hurt the country's crop this year.

  But the $8 billion market has been experiencing sharp swings as traders fret over supplies and

then take profits from those worries.

  On Thursday, arabica prices fell 5.1%, the biggest daily drop since July 2012. They were up 3%

today, trading at $1.3965 a pound.

  "It is not a place for the faint of heart and the light of wallet," said Sterling Smith, a futures

specialist at Citigroup, said of the arabica-coffee market.

  While coffee is trading around $1.40 a pound -- not much more than a cup of deli brew -- the

losses can mount. A single arabica-coffee contract is 37,500 of unroasted beans, so a 40-cent move

is over

$15,000 per contract.

As the drama continues, it poses a challenge to some small traders.

  "It's so hard to trade. It's all over the place" said Augustine Lauria, a former broker from the

now-defunct ICE trading pits, who trades independently and is eyeing investing in coffee. "I'm

waiting for an entry point, but I've got to be careful."

  To be fair, arabica-coffee's performance is a study in understatement compared with the natural

gas market , which has moved at least 5% on nine days in 2014, as a cold and snow-filled winter in

the United States pushed up prices.