Arabica Coffee, Orange Juice, Sugar Rise on Supply Worries
Alexandra Wexler
NEW YORK-Arabica-coffee prices surged to a more than three-month high on Tuesday as investors
worried about the harvest in top grower and exporter Brazil.
The source of more than half of the world's arabica coffee experienced its worst drought in
decades this year, which has reduced the size of the current harvest and damaged trees.
Weather in Brazil's arabica-growing regions has been less than favorable, WeatherBELL Analytics
said in a note. "Given the forecast over the next 30 days, there is an enhanced risk of flowers
aborting in the arabica areas," the meteorological consulting firm said.
A weak flowering would mean a smaller amount of coffee beans would be produced during the 2015
season.
Arabica coffee for delivery in December on the ICE Futures U.S. exchange ended 5.2% higher at
$1.9745 a pound, the highest level since May 7 and the biggest one-day gain since July 31.
Brazil's National Coffee Council expects the 2014 and 2015 coffee harvests to produce about 40
million bags of coffee each. Its forecast for the current year is about 20% smaller than its
original estimate because of the drought. Each bag weighs 132 pounds.
"If one is worried about supply tightness, it would make sense to get in," said Rodrigo Costa,
coffee director at brokerage Newedge in New York.
Global coffee production could fall short of demand next season by the largest amount in almost a
decade due to smaller harvests in Brazil, the International Coffee Organization said last month.
Orange-juice futures also jumped Tuesday as the churning of Hurricane Cristobal off the coast of
top orange-producing state Florida served as a reminder to investors that the Atlantic hurricane
season is far from over.
"It's an awakening to the market," said Boyd Cruel, senior analyst at Vision Financial Markets in
Chicago.
Orange juice for November delivery settled up 4.9% at $1.5160 a pound, the biggest one-day jump
since Nov. 8, 2013, and the highest close since July 23.
The June-November Atlantic hurricane season could bring potentially damaging storms to Florida,
where the coming crop is already expected to be the smallest since the mid-1960s. Previous
hurricanes have damaged groves and ripped unripe fruit from the trees. Orange-juice prices usually
rise when a storm targets the state.
Raw-sugar futures got a boost after Brazilian sugar-cane industry group Unica lowered its forecast
for the center-south region's cane harvest to 545.9 million metric tons, down 5.9% from an earlier
estimate. Raw sugar for delivery in October ended up 2.3% at 15.71 cents a pound, the largest
one-day gain since June 20.
However, sugar output in top producer Brazil's main growing region is still up 6.4% during the
season through the first half of August, and the global sugar market is likely to register a supply
surplus of 1.31 million metric tons for the season, according to the latest outlook from the
London-based International Sugar Organization. "Any possible price recovery brought by production
shocks over the course of 2014-15 might be muted by the huge stocks accumulated since the beginning
of the surplus phase in 2010-11," the ISO said.
In other markets, December-delivery cotton ended up 1.1% at 66.89 cents a pound and cocoa for
December delivery ended down 0.1% at $3,216 a ton.
