Arabica Coffee Futures Rally to Nearly 3-Year High
Alexandra Wexler
NEW YORK--Arabica-coffee prices rallied Thursday as concerns about supplies of the beans amid
record demand squeezed the market to the highest level in nearly three years.
Coffee prices have doubled this year as erratic rainfall clipped output from Brazil, the
world's biggest grower, and fueled worries about how the already weakened trees will fare next
season.
This is a time of year when rains are needed to help the trees flower, analysts say. But dry
weather has caused some trees to drop their flowers, and others aren't flowering at all. Without
flowers, there won't be any coffee cherries--the fruit that contains the seeds that are roasted to
make beans.
Brazil is the source of one-third of the world's coffee and about half of the world's arabica
beans, so any disruption in supplies there ripples through the global marketplace.
Arabica coffee for delivery in December on ICE Futures U.S. rose 3.4% to $2.2165 a pound, the
highest settlement since Jan. 20, 2012.
"I don't expect it to stop," said Hector Galvan, senior market strategist at RJO Futures in
Chicago. "The weather right now is really going to put the pressure on."
He expects futures to crack $2.40 a pound in the next two weeks, a level last seen in November
2011.
The recently ended coffee harvest was Brazil's smallest in three years, after the main growing
region experienced its worst drought in decades in the spring. Next year is an off-year in Brazil's
two-year coffee cycle, meaning production would already have been lower without the unusual weather.
That lower production is being exacerbated by steadily rising demand for the beverage.
Market-research firm Euromonitor International projects that demand for coffee beans will reach a
record 4.95 million metric tons this year, a 2.5% increase over 2013.
Global coffee production could fall short of demand in the season that began Oct. 1 by the
largest amount in nine years, according to the International Coffee Organization.
In other markets, cotton for delivery in December on ICE fell 1.5% to 63.94 cents a pound after
the U.S. Department of Agriculture reported tepid demand for the fiber. During the week ended Oct.
2, net export sales for upland-variety cotton--the most commonly grown type in the U.S.--totaled
68,500 bales, down 35% from the prior four-week average.
But low prices for the fiber could actually turn that trend around, traders and analysts say.
"Mills will be able to take advantage of the much lower price and the likelihood of similar
values in 2015 and possibly 2016...and boost cotton purchases," said Sharon Johnson, senior cotton
specialist and introducing broker for KCG Futures in Atlanta.
December-delivery cocoa closed 0.6% higher at $3,057 a ton. Raw sugar for March delivery ended
down 1.3% at 16.70 cents a pound, while orange juice for November delivery was flat at $1.4320 a
pound.
