Arabica Coffee Extends Gains on Worries About Brazil Rains
Alexandra Wexler
Alexandra Wexler
NEW YORK--Arabica-coffee prices surged Tuesday, extending the previous session's gains as rains
dwindle in Brazil, the top grower and exporter of the beans.
Traders closed out bets that prices would continue to fall after the market ended at 10 1/2
-month lows last week. Buy stops, or pre-placed orders to buy when prices hit a certain level, were
also triggered early Tuesday as futures rose above $1.70 a pound.
Arabica coffee for delivery in March on the ICE Futures U.S. exchange was recently up 3.6% at
$1.7415 a pound, the highest level since Dec. 22. Futures have gained 8.1% this week.
Prices had been under pressure recently as rainfall in Brazil's coffee-growing areas appeared
to be helping the trees recover from 2014's severe drought, easing traders' concerns that this
year's crop might be damaged. But some of those fears are now creeping back into the market.
"Despite erratic rainfall, coffee plantations, orange and sugar cane are in a better position,
since the soil is cultivated where such crops have good levels of humidity, but even so, the
conditions are not ideal for the development of crops, only satisfactory," said São Paulo-based
forecaster Somar Meteorologia.
Brazil's National Coffee Council, which represents coffee cooperatives, said rainfall in the
country's biggest coffee-growing region was below the historical average during the month of
December. Last year, Brazil's dry weather began in January, culminating in the worst drought in
decades.
"Traders have fresh in their memory last year's drought," said Rodrigo Costa, director of
coffee at Société Générale.
Meanwhile, raw-sugar futures spiked Tuesday morning as buy-stops were triggered above 14.5
cents, 14.6 cents and 14.7 cents a pound, sending the contract for delivery in March to a two-week
high of 15.06 cents a pound.
Futures have since pulled back, with March-delivery sugar recently up 2.7% at 14.64 cents a
pound.
"Obviously some selling came in to take advantage of that stop activity, " said Michael
McDougall, senior vice president at brokerage Newedge. "It's going to be tough to sustain any rally
at this point in time."
Oversupply continues to plague the market for the sweetener, which fell for a fourth straight
year in 2014, the longest losing streak for raw sugar since at least 1971, the oldest data available
from CQG.
In other markets, cocoa for March delivery eased 0.2% to $2,937 a ton, while orange juice for
delivery in March fell 1.4% to $1.4445 a pound. March-delivery cotton rose 0.7% to 61.15 cents a
pound.
dwindle in Brazil, the top grower and exporter of the beans.
Traders closed out bets that prices would continue to fall after the market ended at 10 1/2
-month lows last week. Buy stops, or pre-placed orders to buy when prices hit a certain level, were
also triggered early Tuesday as futures rose above $1.70 a pound.
Arabica coffee for delivery in March on the ICE Futures U.S. exchange was recently up 3.6% at
$1.7415 a pound, the highest level since Dec. 22. Futures have gained 8.1% this week.
Prices had been under pressure recently as rainfall in Brazil's coffee-growing areas appeared
to be helping the trees recover from 2014's severe drought, easing traders' concerns that this
year's crop might be damaged. But some of those fears are now creeping back into the market.
"Despite erratic rainfall, coffee plantations, orange and sugar cane are in a better position,
since the soil is cultivated where such crops have good levels of humidity, but even so, the
conditions are not ideal for the development of crops, only satisfactory," said São Paulo-based
forecaster Somar Meteorologia.
Brazil's National Coffee Council, which represents coffee cooperatives, said rainfall in the
country's biggest coffee-growing region was below the historical average during the month of
December. Last year, Brazil's dry weather began in January, culminating in the worst drought in
decades.
"Traders have fresh in their memory last year's drought," said Rodrigo Costa, director of
coffee at Société Générale.
Meanwhile, raw-sugar futures spiked Tuesday morning as buy-stops were triggered above 14.5
cents, 14.6 cents and 14.7 cents a pound, sending the contract for delivery in March to a two-week
high of 15.06 cents a pound.
Futures have since pulled back, with March-delivery sugar recently up 2.7% at 14.64 cents a
pound.
"Obviously some selling came in to take advantage of that stop activity, " said Michael
McDougall, senior vice president at brokerage Newedge. "It's going to be tough to sustain any rally
at this point in time."
Oversupply continues to plague the market for the sweetener, which fell for a fourth straight
year in 2014, the longest losing streak for raw sugar since at least 1971, the oldest data available
from CQG.
In other markets, cocoa for March delivery eased 0.2% to $2,937 a ton, while orange juice for
delivery in March fell 1.4% to $1.4445 a pound. March-delivery cotton rose 0.7% to 61.15 cents a
pound.
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