Arabica-Coffee Futures Enter Bear-Market Territory

Leslie Josephs

     Arabica-coffee futures entered bear-market territory Tuesday as investors bet that a drought in

Brazil did less damage to the country's coffee harvest than initially thought.

     Arabica coffee for July delivery on ICE Futures U.S. fell as low as $1.6935 a pound, a

two-month low. If futures settle below $1.7184 a pound, arabica coffee will officially be in a bear

market, defined as a 20% drop from the recent high.

     Brazil's worst drought in decades has prompted trade houses, analysts and the country's

government forecaster to slash estimates for this year's crop. But the damage has so far been milder

than anticipated, and stockpiles left over from last year are helping keep global markets supplied.

Brazil is the source of one-third of the world's coffee and is the biggest supplier of arabica

beans, which are prized for their mild taste.

     In a report released last week, coffee dealer Mercon Coffee Group, which has offices in

Nicaragua and South Florida, lowered its estimate from December for Brazil's arabica crop by 13% to

33.45 million bags. But Mercon said that rains in March and April helped coffee trees recover from

hot and dry weather.

     "Along the way, we were pleasantly surprised on the general aspect of the trees and how they

had recovered compared with the previous trips during the year," Mercon said in the report.

     In other markets, orange-juice concentrate for July delivery was up 1.1% at $1.6210 a pound,

while July cocoa was down 0.1% at $3,066 a ton.

     July cotton was up 1.3% at 87.56 cents a pound, and raw sugar was up 0.4% at 17.24 cents a

pound.