Arabica Coffee Extends Gains on Worries About Brazil Rains

Alexandra Wexler

     NEW YORK--Arabica-coffee futures jumped higher for a second consecutive session on Tuesday as

waning rains in top-grower Brazil spurred traders to bet prices would move even higher.

     Traders also closed out bets that prices would fall, taking profits after the arabica 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 triggered early Tuesday as futures rose above $1.70 a pound.

     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.

     "For this month, we expect rain within the average--the problem will be the distribution," said

Marco Antonio dos Santos, agro-meteorologist at Somar Meteorologia, a São Paulo-based weather

forecaster. "If we only get it as localized downpours, then some areas, or even some farms, could

get less rain than they need."

     Brazil's National Coffee Council, which represents 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.

     Arabica coffee for delivery in March on the ICE Futures U.S. exchange ended up 4.1% at $1.7490

a pound on Tuesday, the highest level since Dec. 16. Futures have gained 8.6% this week.

     "For coffee growing, the conditions are good for the moment, but they're not ideal," Mr. dos

Santos said. "We'd need good rain above the average to be ideal."

     In other markets, raw-sugar futures posted their biggest daily gain in nearly four months after

buy stops were triggered at several levels above 14.5 cents a pound.

     The March contract rose 4.3% to 14.87 cents a pound, the highest settlement for the most

actively traded contract since Dec. 19.

     "Concerns about dry conditions during the very important January/February period have led to an

improved chart picture," said James Cassidy, head of the sugar desk at brokerage Newedge. Brazil is

the world's biggest sugar producer.

     Still, 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.

     Cocoa for March delivery eased 1.4% to $2,902 a ton, the lowest settlement since Dec. 15, while

orange juice for delivery in March fell 2.9% to $1.4225 a pound in profit-taking. March-delivery

cotton fell 0.8% to 60.20 cents a pound.