Arabica Coffee Near 10 1/2 Week Low; Cocoa, Sugar Firm

  NEW YORK--Arabica-coffee futures were trading near a more-than-10-week low on Wednesday as

uncertainty over top grower Brazil's crop continued to cloud global supply forecasts.

  Arabica for July on ICE Futures U.S. were down 2.1% at $1.6740 a pound. Arabica coffee settled in

bear-market territory on Tuesday, having fallen more than 20% from an April high of $2.1480 a pound.

  Brazil's worst drought in decades hit coffee farms earlier this year, stunting the development of

some arabica-coffee cherries during a key maturation stage. Brazil is the source of one-third of the

world's coffee.

  But growers only started picking their crop in the last few weeks, making it difficult to gauge

the damage, industry members have said.

  "Of course, losses will occur," said Guilherme Braga, head of Brazilian coffee-exporters' group

Cecafe.  2

  But Mr. Braga said that only 10% of coffee has been picked and processed, and that amount "not

representative to allow more concrete opinion on losses." He said a quarter of the coffee would have

to be processed for a better estimate.

  July frozen orange-juice concentrate was down 0.4% at $1.6225 a pound, while cotton was 0.6% lower

at 86.83 cents a pound.

  Raw sugar for July was unchanged at 17.19 cents a pound. July cocoa was also flat at $3,070 a ton.

Coffee Enters Bear Market as Brazil Sees Smaller Crop Loss
2014-06-04 08:33:39.155 GMT

By Marvin G. Perez and Luzi Ann Javier
     June 4 (Bloomberg) -- Coffee futures entered a bear market after rains eased drought damage for plants in Brazil, the world’s top producer and exporter.
     Growers are facing less severe crop losses than estimated after showers last month reduced the impact of the worst dry spell in 50 years, Brazil’s Agriculture Minister Neri Gellersaid on June 2. Next year, farmers may collect a “bumper”
harvest, he said.
     Futures have tumbled 23 percent from a two-year high in April, partly as rising American stockpiles helped cushion the impact of production declines after Brazil’s drought. Output this year may be 50.5 million bags, according to Mercon Group.
That’s higher than the 49.5 million estimated by the U.S. government in May.
     Bigger production forecasts “suggest that the damage was not as significant as expected,” Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago, said yesterday in a telephone interview. “We are also in the middle of the harvest,
and conditions remain ideal, with no disruptions.”
     Arabica coffee for July delivery fell 0.5 percent to $1.703 a pound today on ICE Futures U.S. in New York. Prices yesterday marked a 20 percent drop from this year’s settlement high of$2.148 on April 24, meeting the common definition of a bear market.

                     ‘Pleasantly Surprised’

     Mercon said in a report to clients that it was “pleasantly surprised” that crops in areas worst hit by the dry weather are recovering. Brazil’s crop forecasting agency Conab last month said it expected this year’s output to be 44.6 million bags,
each weighing 60 kilograms (132 pounds). The forecast may be revised higher by the end of the harvest, Minister Geller said, declining to give specific figures.
     Prices have surged 54 percent this year as Brazil’s drought made coffee 2014’s best performer in the S&P GSCI gauge of 24 raw materials. An unprecedented three months with almost no moisture prompted Volcafe Ltd. to forecast the biggest globalshortage in more than a decade. Demand will exceed output by 11.3 million bags, according to the Winterthur, Switzerland- based unit of commodities trader ED&F Man Holdings Ltd.
     Ipanema Coffees, a supplier of beans to Starbucks Corp., expects yields for its crop to drop by as much as 40 percent.
     “It’s a mistake to suppose that coming rains will solve the problems we’ve had,” Washington Rodrigues, the president and chief executive officer of Alfenas, Minas Gerais-basedIpanema, said last week. “Once vegetative growth is lost, you
don’t recover it.”
     J.M. Smucker Co., the maker of Folgers, the best-selling U.S. brand, said yesterday that it increased coffee prices by an average of 9 percent after bean costs rose.

                         Hedge-Fund Bets

     Hedge funds are paring expectations that this year’s rally will continue. Money mangers cut their coffee net-long position by 3.4 percent to 39,482 contracts as of May 27, the seconddecline in three weeks. Prices slumped 14 percent last month, the most since 2011.
     Stockpiles of unroasted beans in the U.S.., the world’s biggest consumer and importer, rose 7.6 percent in April from a year earlier, the New York-based Green Coffee Association saidMay 15.
     The global balance will switch in the next season that starts in October in most countries from a surplus of 4.7 million bags the previous year, Volcafe, said in a quarterlyreport. World inventories will fall to 40.2 million bags from 51.5 million bags in 2013-2014, Kona Haque, head of commodities research at ED&F Man in London, said yesterday.
     “We won’t know the exact size of Brazilian losses until at least July,” and that may keep volatility high as the nation heads into the winter season, when frost can damage plantings,said Cruel of Vision Financial Markets.