Robusta coffee extends revival. Arabica struggles

Robusta coffee futures extended their revival, as Vietnam came closer to a deal which could stockpile some 20% of the domestic harvest, but arabica prices, which have defied expectations of a drop below 100 cents a pound, could not keep up their recovery.

Vietnam's farm ministry has "signed today for submitting to the government" plans for the state to buy-up robusta coffee in an effort to support the domestic industry Cao Duc Phat, agriculture minister, told the country's National Assembly.

Vietnam is the top producer of robusta coffee, a crop which is a huge support for the country's rural economy besides being a major export earner, with shipments in 2011-12 valued at $3.4bn.

While Mr Phat did not specific the volumes the ministry wishes to see stockpiled, reports have previously talked of some 300,000 tonnes, equivalent to about 20% of the expected 2013-14 harvest currently in progress.

'Coffee is being withheld'

The move added to the upbeat factors which have lifted robusta coffee futures from a three-year low of $1,431 a tonne, for a nearest-but-one contract, reached by London's January contract on November 7.

A 40% slump year on year in Vietnam's coffee exports last month to 61,100 tonnes (1.02m 60-kilogramme bags) is being by some commentators as a sign already of squeezed supplies, rather than soft demand.

Commerzbank analysts on Tuesday termed the decline "an indication that coffee is being withheld in a bid to shore up the price, and that the state is planning to stockpile coffee".

The fall in Vietnam's exports was mirrored by a decline in inventories held in London for delivery against robusta futures, to 48,770 tonnes as of November 11, down from 53,020 tonnes two weeks before.

Storm damage

Robusta prices have also obtained support from reports of the Vietnam's harvest, which has been expected to hit 27m-29m bags, being threatened by heavy rains, which have at least delayed cherry picking and likely reduced quality and quantity too.

"There were concerns that rainfall in Vietnam adversely affected the drying of the crop as well as affecting the trees," Vanessa Tan at Phillip Futures said, if adding that "it remains to be seen how much damage was inflicted on the crop".

Meanwhile, arabica prices have gained support from the strong performance of robusta beans and estimates by Costa Rica coffee researchers that the outbreak of roya fungus in Central America could see the region's output fall a further 12%, after a 20% drop last season.

They also put a recovery in arabica prices to 200 cents a pound on the cards next year, thanks to the impact of the current low prices in undermining investment in plantations.

"Coffee prices are currently finding support from several sides at once – a rare occurrence in recent months," Commerzbank said.

Colombia upgrade

However, an early rebound in arabica prices on Tuesday ran out of steam as an upgrade to the crop in Colombia crop, the world's second biggest producer of the variety, told.

The Colombian coffee producers' federation, Fedecafe, late on Monday raised by 1m bags to 11m bags its forecast for domestic output in 2013.

"Weather has been fine for the harvest, and we see good conditions for flowering," Luis Genaro Munoz, the Fedecafe general manager, said.

Phillip Futures' Ms Tan said: "Fundamentally, supply fundamentals of the arabica coffee market still appears to be bearish," facing "an oversupply".

The broker forecast that the bean's "bearish fundamentals" will push prices below 100 cents a pound.

Arabica futures for March stood 0.5% lower at 108.95 cents a pound in New York at 08:00 local time (13:00 UK time), when London robusta for January was 0.5% higher at $1,573 a tonne.

Robusta Coffee Hits 3-Week High as Rains Delay Vietnam Harvest

Neena Rai

  Robusta coffee futures firmed in afternoon European trading Monday after

thunderstorms and heavy rain caused delays to Vietnam's bean harvest.

  At 1400 GMT, January robusta coffee futures traded 1.1% higher at $1,528 a

metric ton, after the market hit an intraday high of $1,545 a ton--the highest

level in three weeks.

  Typhoon Haiyan made landfall in north-eastern and central Vietnam last week,

causing widespread power outages and triggering heavy rains and floods.

   "Typhoon Haiyan tracked inland well north of the coffee belt during the

weekend. Rains associated with this system were mostly north of the belt. A

weak cyclone may bring more rain to the region during the coming days," said

Global Ag weather.

  Vietnam is the world's largest grower of robusta coffee beans, which are used

primarily to make instant coffee blends.

USDA flags losses facing Brazilian coffee growers

Arabica coffee growers in Brazil are struggling with production costs massively higher than the market is offering in prices, highlighting the crisis which is prompting them to demand further government support.

Production costs as measured in Guaxupe, in Minas Gerais, Brazil's top coffee-growing state, have risen 12% to 187.56 cents a pound in 2013-14, according to the US Department of Agriculture's Brasilia bureau.

The increase is "mainly due to higher fixed and after-harvest costs", the bureau said, highlighting bigger charges for factors such as insurance, transport and depreciation.

And it is significantly higher than the market price of arabica coffee, for which the bureau flagged an estimate of 242.68 reais per 60 kilogramme bag, equivalent to $106 per bag, or $0.80 per pound.

New York futures closed on Friday at 105.75 cents per pound, equivalent to $181 per bag – implying, on the face of it, that Brazil's growers will lose more than $4bn.

More support?

The data underline the difficulties that low coffee prices are presenting to an important part of Brazil's rural economy.

Indeed, growers have sent the government a so-called "coffee pact" demanding support including government stock-building to a level equivalent to 50% of exports, and encouraging the ability of growers to be able to pay off some debts in coffee rather than cash.

Brazil's government has already released R$1bn to buy 3m bags at R$343.00 per bag through an options programme, with the contracts selling at auction for R$1.715-7.70 per bag.

However, it is believed to be considering fresh measures, which could be announced this week.

'Worse quality'

The comments came as the bureau pegged Brazil's overall coffee output in 2013-14 at 53.1m bags, down 600,000 bags compared with its previous forecast, but well above the 47.5m bags at which Brazil's Conab pegs the harvest.

The USDA bureau put the arabica harvest at 39.2 m bags, with robusta output hitting 13.9m bags.

USDA officials have a history of disputing Conab coffee data, which they say typically largely underestimates production, and do not fit to a credible balance sheet.

"According to the industry, the overall quality of the 2013 crop is worse than the previous year due to weather problems, eg dry spells in January/February and rainfall during May/July in many growing areas," the bureau said.

Cocoa Corrects Lower after Rally; Technical Charts Signal Gains for Sugar

Neena Rai

  Cocoa futures fell in Europe Monday morning as the market corrected itself as

buy-stops were triggered after the prior session's rally. By contrast, robusta

coffee and sugar futures edged higher.

  At 1200 GMT, March cocoa futures fell 1.1% to GBP1,720 a metric ton.

  "London cocoa prices came under renewed pressure, trading around the

GBP1,720-a-ton area. Short-term, we expect further consolidation around the

GBP1,720-1750 area, as the cocoa market is looking for some clear direction,"

Myrto Sokou, senior research analyst at Sucden Financial brokerage said.

  The cocoa market's supply fundamentals have improved recently, with

favourable weather conditions in West Africa helping to boost prospects for the

cocoa crop amid buoyant bean arrivals from top grower Ivory Coast, weighing on

prices, said Phillip Futures.

  Sugar futures rose as technical charts signaled the potential for further

gains. Sugar for March delivery increased 0.9% to $168.40 a ton.

  January robusta coffee futures ticked 0.4% higher to $1,517 a ton.

Produtores do Vietnã pretende manter a produção, mesmo com preço baixos

   

Produtores de café no Vietnã pretende manter a produção mesmo depois de os custos aumentaram e os preços caíram para o menor nível em três anos. Nove em cada 10 produtores consultados pela Bloomberg em província de Dak Lak , a principal região produtora , disse que as margens enquanto tinha diminuído eles iriam continuar a aplicar fertilizantes e investir em suas plantações para preservar a produção. Os agricultores já estão colhendo uma safra recorde de 1,7 milhões de toneladas( 28,3 milhões de sacas), 13 por cento a mais do que no ano anterior , de acordo com a mediana de 11 estimativas comerciante e exportador compilados separadamente . Futuros negociados em Londres, caíram 17 por cento no mês passado e atingiu uma baixa de três anos como fontes dos grãos utilizados pela Nestlé SA ( NESN ) ultrapassou a demanda . O levantamento dos agricultores mostra os preços podem ter de diminuir ainda mais para estimular a cortes de produção . Safras globais são definidas para expandir 7 por cento neste ano-safra de 68,4 milhões de sacas ( 4,1 milhões de toneladas ) , ultrapassando um ganho de 1,9 por cento na demanda de 66 milhões de sacas, de acordo com a Macquarie Group Ltd. em 11 novembro. "Os agricultores na minha área definitivamente não vai derrubar árvores ou corte de investimentos ", disse Tran Van Nguyen , chefe da associação de agricultores em Hoa Thuan Comuna em Buon Ma Thuot City, província de Dak Lak . " Eles vão manter a aplicação de fertilizantes e pesticidas para aumentar a produção na próxima temporada. " Preços na província caiu 35 por cento em relação a março alto para 29.600 dong ( 1,40 dólares ) por quilo em 07 de novembro , o menor nível desde outubro de 2010 , os dados do Centro de Comércio e show de Turismo. Enquanto as taxas caíram , gastando em tudo, desde fertilizantes e pesticidas de trabalho aumentou cerca de 30 por cento nos últimos três a cinco anos , disse Van Thanh Huy, diretor-geral do Export -Import Investimento Daklak Joint -Stock Corp Avaliando o nível exato de custos de produção é difícil , porque varia com a localização , o rendimento ea árvore maturidade, disse Huy . O governo pode ajudar se os agricultores não têm fundos suficientes . O Ministério da Agricultura e do Vietnã Café e Cacau Associação vai propor o armazenamento tanto quanto 300.000 toneladas para conter quedas de preços , Thoi Bao Kinh Te Saigon disse na semana passada , citando Nguyen Viet Vinh , secretário-geral da Vicofa . " Quando os agricultores no Vietnã dizem que vão manter a produção independente , é porque as margens são ainda bastante decente ", disse Abah Ofon , um analista baseado em Cingapura Standard Chartered Plc . " Depois de três anos , se fizerem as perdas , será uma história completamente diferente . " Enquanto a maioria dos produtores vai continuar a investir em suas plantações , outros podem ser tentados a mudar culturas ou converter suas terras para uso residencial , disse Huy do Export -Import Investimento Daklak Joint -Stock Corp "Eu posso voltar-se para outras plantas que exigem menos investimento, se os preços se mantenham essa baixa ", disse Vo Xuan Thang , um agricultor de 52 anos de idade, que tem crescido de café por duas décadas. "Seria um bom momento para que recupere o solo , e eu vou voltar depois de alguns anos , se os preços são bons. " A colheita no Vietnã é de cerca de 30 por cento completo, mais do que a taxa de 20 por cento no mesmo período do ano passado , de acordo com o levantamento de comerciantes e transportadores compilados em 04-07 novembro . Menos de 10 por cento foi vendido , um nível semelhante ao do ano anterior, mostra. Os agricultores foram pesquisados de 5 a 7 novembro

COMMODITIES-Coffee, cocoa jump as softs rule; oil, metals quiet

Reuters - Barani Krishnan

    NEW YORK, Nov 15  - Coffee had its biggest gain in

more than two years in London, reflecting bad harvesting weather

for Vietnam's robusta crop, while cocoa rallied in New York as

the "softs" markets dominated Friday's action in commodities.

    Oil , copper and gold prices

were little changed due to familiar geopolitical and

supply-demand conditions, although a stronger dollar weighed

slightly on those major raw materials markets. 

    Coffee and cocoa had among the biggest gains of the day on

the Thomson Reuters/Core Commodity CRB index. The two

crops, along with sugar, are collectively known as soft

commodities.

    The CRB, a bellwether for the commodities complex, rose 0.2

percent after 14 of the 19 markets it tracks ended in the

positive.

    Arabica, the coffee grade preferred in the United States and

tracked by the CRB, rose more than 3 percent in New York to lead

the CRB's gains.

    The London-traded robusta, which is not quoted on the CRB,

closed up 4 percent for its largest daily gain since mid-2011.

    "As we go into the weekend and shore things up, you have

people who don't want to be left behind the eight ball if we

have a turnaround next week," Hector Galvan, a senior softs

broker at RJO Futures in Chicago, said, using pool players'

lingo for an unfinished game.

    Arabica coffee's second-month contract on New York's ICE

Futures finished up 3.45 cents, or 3.3 percent, at $1.091

per lb. Traders said the market rebounded on technical covering

after hitting a near five-year low of $1.0415 last week.

    Robusta's most-active second month position on London's

Liffe closed up $64 at $1,511 a tonne. It had surged

much as 5 percent during the day to a session high of $1,520.

    Robusta rallied in response to rains hampering harvest of

the crop in top growing country Vietnam. A technically oversold

market also drove short-covering, robusta traders said.

    Cocoa had the second largest gains on the CRB. In New York,

the beverage and confection commodity's second-month contract

rose nearly 2 percent to finish at $2,730 a tonne.

    Soybeans weighed the most on the CRB. The crop's front-month

contract in Chicago closed down 2.5 percent at $12.80-1/2

a bushel after disappointing U.S. exports of the crop, weak cash

prices and rising harvest expectations out of South America.

    Prices at 3:45 p.m. EDT (2045 GMT)     

                             LAST/      NET    PCT     YTD

                             CLOSE      CHG    CHG     CHG

US crude              96.67    -0.02   0.0%    5.3%

Brent crude          108.31     0.03   0.0%   -2.5%

Natural gas           3.660    0.055   1.5%    9.2%

                                                         

US gold             1287.40     1.10   0.1%  -23.2%

Gold                1287.70     0.69   0.1%  -23.1%

US Copper              3.17     0.01   0.3%  -13.2%

LME Copper          7010.00    18.00   0.3%  -11.6%

Dollar               80.827   -0.198  -0.2%    5.3%

CRB                 274.337    0.494   0.2%   -7.0%

                                                         

US corn              422.00    -4.50  -1.1%  -39.6%

US soybeans         1280.50   -33.00  -2.5%   -9.7%

US wheat             644.50    -0.25   0.0%  -17.2%

                                                         

US Coffee           105.75     3.15   3.1%  -26.5%

US Cocoa           2736.00    75.00   2.8%   22.4%

US Sugar             17.55    -0.09  -0.5%  -10.0%

                                                         

US silver           20.727   20.520   1.6%  -31.4%

US platinum        1438.90    -5.20   0.0%   -6.5%

US palladium        732.65    -7.15  -1.0%    4.2%

ICE Coffee Consolidates Above Contract Low--Technical Analysis

Dow Jones  -  Kira Brecht

  ICE March coffee prices bounced higher Friday, as the market continues to

consolidate just above its fresh contract low set November 6 at $1.0415 a

pound; ICE coffee futures spent most of the past week trading sideways, just

above the low.

  ICE March coffee recently traded up 270 points at $1.0835 a pound.

  The ICE coffee market has been trending lower in a long-term bear market

since May 2011. Mid October saw the bears accelerate the downside action and

March coffee prices fell sharply. From Oct. 15 to Nov. 6, ICE March coffee

tumbled from $1.2075 to $1.0415 a pound.

  During that sharp and steady sell-off, daily momentum tools fell to extremely

oversold levels. On Nov. 6, the 9-day relative strength index hit 8%. Any

reading under 30% is considered oversold. The market was due for a snapback

corrective rally and consolidation move, which has unfolded over the last week.

  ICE March coffee bounced as high as $1.0985, which is now key nearby

resistance to watch. But, the market has remained under its 20-day moving

average, which was at $1.0927 on Friday.

  Daily momentum continues to point higher and could support additional

corrective probing to the upside in the near term. But the market would need to

sustain a rally through the 20-day moving average to open the door to

additional strength. If gains are achieved through that zone in the near term,

traders could look ti probe toward the upper Bollinger band line, which came in

at $1.1571 on Friday.

  Ahead of that upper Bollinger target, a Fibonacci retracement of the Oct.

15-Nov. 6 sell-off identifies the 38.2% retracement level around $1.1058, the

50% level at $1.1251 and the 61.8% level at $1.1415.

   The long-term bear market remains intact, but coffee is likely to see a

period of consolidation or upward correction as the market digests the recent

sell-off. There are no bottom formations on the daily chart to suggest a major

low is forming. On the monthly continuation chart, however, major long-term

support is seen at the December 2008 low at $1.0170. The market is in proximity

of that long-term bearish objective, which could be a tough floor for the bears

to crack at least initially.

Café tem dia tranquilo e março gira ao redor dos 105,00 cents

   

  Os contratos futuros de café arábica negociados na ICE Futures US encerraram esta quinta-feira com ligeira retração, em uma sessão caracterizada por um viés consolidativo, sem maiores oscilações, com os preços não apresentando volatilidade considerável. O março "vagou" a maior parte do pregão próximo do nível de 105,00 centavos, dentro de um range de 200 pontos. As rolagens de posições foram bastante efetivas, sendo que o dezembro, rapidamente, vem diminuindo o montante de posições em aberto, em contrapartida ao aumento da liquidez do março. Na próxima quarta-feira tem início o período de notificação do primeiro contrato na casa de comercialização norte-americana. A sessão desta quinta foi marcada principalmente por vendas especulativas, sem nem sequer ter uma tentativa de ganhos, tal qual observado nos pregões recentes. Diante disso, as ações foram técnicas e o março conseguiu se posicionar, ao final do processo, próximo do patamar psicológico atual.

O mercado continua focado na questão da disponibilidade. Como indicado por um recente levantamento da Swiss Volcafé, na temporada 2012/2013, o excedente de grãos no mercado internacional chegou a 7,4 milhões de sacas, contra 800 mil sacas do ano anterior. Para a temporada 2013/2014, por sua vez, o superávit deverá gravitar entre 2 e 3 milhões de sacas, na esteira de fortes safras do Brasil, Vietnã e também da Colômbia. Diante desse quadro, muitos players se sentem estimulados a continuar limitando suas aquisições, focados em garantir preços mais convidativos. Para alguns operadores, os preços deprimidos levarão a uma diminuição nos tratos culturais das lavouras, entretanto, o reflexo disso só será sentida nas próximas safras.

Segundo divulgado pelo Conselho Nacional do Café, nesta semana, o ministro da Agricultura, Antônio Andrade, informou que comunicará a prorrogação, por 120 dias, do pagamento dos débitos referentes à cafeicultura, a partir de 1º de novembro, incluindo as parcelas vencidas e vincendas. Assim, os produtores teriam um alívio até março de 2014, mesmo período em que terá início o pagamento dos leilões de opções.

No encerramento do dia em Nova Iorque, a posição dezembro teve queda de 45 pontos, com 102,60 centavos de dólar por libra peso, com a máxima em 104,45 centavos e a mínima de 102,15 centavos, com o março registrando baixa de 30 pontos, com 105,65 centavos por libra, com a máxima em 107,30 centavos e a mínima em 105,30 centavos. Na Euronext/Liffe, em Londres, a posição janeiro teve queda de 18 dólares, com 1.447 dólares por tonelada, com o março tendo desvalorização de 19 dólares, para o nível de 1.444 dólares por tonelada.

De acordo com analistas internacionais, o dia na bolsa nova-iorquina foi técnico e de poucas oscilações, assim como os mercados externos também não esboçaram maiores evoluções. As bolsas de valores norte-americanas se mantiveram estáveis, ao passo que o dólar conseguiu ter um ligeiro avanço em relação a uma cesta de moedas internacionais, ao passo que as commodities não registraram uma tendência clara, ficando entre altas para segmentos como petróleo, ouro e prata, ao passo que milho e algodão aferiram perdas.

"Tivemos uma tentativa de recuperação na semana, mas não avançamos de forma efetiva e tivemos até um contra golpe na quarta-feira, com quedas mais firmes. A tendência parece ser consolidativa, no curtíssimo prazo, com o março se aproximando dos 105,00 centavos. Entretanto, no curto e médio prazo temos um viés baixista e é possível que o nível de 100,00 centavos seja buscado", disse um trader.

A renda do produtor brasileiro continuará crescendo em 2014, mas em ritmo menor em relação aos anos anteriores. É o que mostram os novos dados do VBP (Valor Bruto da Produção) do Ministério da Agricultura. O café, cujo valor de produção já registrou queda neste ano, cairá ainda mais em 2014, para 12 bilhões de reais. Apesar da produção maior no setor, os produtores não conseguem obter o mesmo patamar de renda registrado nos últimos anos. Em 2011, por exemplo, a cafeicultura obteve uma produção no valor recorde de 22 bilhões de reais.

As exportações brasileiras no mês de novembro, até o dia 13, totalizaram 567.773 sacas de café, queda de 6,79% em relação às 609.155 sacas embarcadas no mesmo período do mês anterior, de acordo com informações do Cecafé (Conselho dos Exportadores de Café do Brasil).

Os estoques certificados de café na bolsa de Nova Iorque tiveram queda de 2.580 sacas, indo para 2.701.910 sacas. Tecnicamente, o dezembro na ICE Futures US tem resistência em 104,45-104,50, 104,90-105,00, 105,50, 106,00, 106,35, 106,50, 106,95-107,00, 107,30, 107,50, 107,80-107,85, 108,00, 108,50 e 109,00 centavos de dólar, com o suporte em 102,15, 102,00, 101,50, 101,00, 100,95, 100,50, 100,10-100,00, 99,50, 99,00, 98,50, 98,00, 97,50, 97,00, 96,50 e 96,00 centavos.

Londres mantém ação vendedora: janeiro fica abaixo de US$ 1.450

   

  Os contratos futuros de café robusta negociados na Euronext/Lifee ampliaram as perdas nesta quinta-feira, em um dia caracterizado por um volume modesto de papéis comercializados. a posição janeiro, mais uma vez, testou o suporte de 1.450 dólares e conseguiu, ao final do pregão, se posicionar abaixo desse nível psicológico. Segundo analistas internacionais, os robustas voltam a registrar uma movimentação preponderantemente vendedora. Vários desses especialistas sustentam que, ao contrário do verificado no segmento de arábicas, haveria ainda alguma "gordura" para ser queimada nas cotações dos robustas, fruto da demanda efetiva que o grão teve ao longo das últimas temporadas e também da retração vendedora de alguns players. Para esses analistas, um nível próximo de 1.300 dólares pode, efetivamente, ser testado em Londres.

"Tivemos uma sessão morosa, de poucos negócios, mas com os vendedores na linha de frente. Chegamos a tocar na mínima de 1.441 dólares, sendo que nesse nível conseguimos detectar algumas aquisições de comerciais que, no entanto, foram apenas pontuais, sem força para mudar o direcionamento das cotações", disse um trader.

O janeiro teve uma movimentação ao longo do dia de 4,18 mil contratos, contra 2,04 mil do março. O spread entre as posições janeiro e março ficou em 3 dólares. No encerramento do dia, o janeiro teve queda de 18 dólares, com 1.447 dólares por tonelada, com o março tendo desvalorização de 19 dólares, para o nível de 1.444 dólares por tonelada.

Starbucks Costs Retreat in Coffee Bear Market Slump: Commodities

Bloomberg - Marvin G. Perez & Luzi Ann Javier - Nov 13, 2013

Like many coffee growers, Nils Solorzano Villareal figured it made sense to expand output as prices surged to a 14-year high in 2011. Now, the 71-year-old Costa Rican farmer is harvesting at a loss.

Record crops from Brazil to Vietnam are compounding a global surplus that drove prices down 26 percent this year, heading for a third annual decline and the longest slump in two decades. Solorzano, who added trees and fertilizer to expand his farm to four hectares (9.9 acres) from three, said he is spending $140 to produce each 60-kilogram (132-pound) bag of arabica-coffee beans that sells for about $132.

“We increased investments in the last few years because we thought prices will stay high,” Solorzano said by telephone from Montes de Oro, where he has been farming for three decades on Costa Rica’s Pacific slopes about 130 kilometers (81 miles) north of the capital, San Jose. “We’re still hopeful that prices will rebound at some point. We can’t do anything else because the land around us is very hilly.”

Global output will exceed consumption for a fourth season in 2014, the longest glut in 11 years, the U.S government estimates. The price of arabica traded in New York will drop 10 percent to 95 cents a pound by March, the lowest since July 2006, based on the median of 13 forecasts in a Bloomberg survey of traders. Lower costs improved profit margins for Green Mountain Coffee Roasters Inc., while Starbucks (SBUX) Corp. and Kraft Foods Group cut the retail cost of packaged beans.

‘Nothing Bullish’

“There’s so much coffee around, all over, that it will take at least one year and a half for supplies to diminish and prices to start rebounding,” said Roberto Higgins, a director at Guide Investimentos SA Corretora de Valores, a broker in Sao Paulo. “There’s nothing bullish in this market.”

Prices slumped to $1.0595 a pound yesterday on ICE Futures U.S., heading for this year’s third-biggest loss among 24 commodities tracked by Standard & Poor’s GSCI Spot Index, which fell 5.1 percent. Most agricultural products tumbled this year, with corn down a record 38 percent as global crops rebounded from a 2012 drought. The MSCI All-Country World Index of equities rose 16 percent, and the Bloomberg Dollar Index climbed 3.2 percent.

Global production will expand 3.1 percent to 151.9 million bags (9.11 million metric tons) in the year that began Oct. 1, up 15 percent from 2008, with a surplus of 8.7 million bags, Macquarie Bank Ltd. said in an Oct. 4 report. The glut is enough to supply every coffee drinker for almost a year in Germany, the largest consumer after the U.S. and Brazil. Most of the excess are arabica varieties found in specialty coffees sold by Starbucks and other coffee shops, the bank said.

Brazil Record

Brazil, the largest grower and exporter, will reap an all-time high of 59 million bags in the harvest that starts in April, according to the median estimate of eight traders and analysts surveyed by Bloomberg News. Output in the country, which will shift next year to the high-yielding half of the biennial cycle for trees, surged 69 percent in the past decade, U.S. Department of Agriculture data show.

Global inventories will rise to 76.7 million bags by the end of September 2014, boosting the ratio of stockpiles to use to 54 percent, the highest since at least 2008, according to Macquarie, which predicted prices will reach 90 cents by the second quarter.

Hedge funds and other speculators have bet on lower prices since July 2012 and had a net-short holding of 28,289 contracts as of Nov. 5, the most since March, data from the U.S. Commodity Futures Trading Commission show.

Stockpile Supply

Brazil, Latin America’s biggest economy, will seek to ease the glut and limit price declines by increasing reserves. The government sold option contracts in September and October that allow growers to sell beans into state-owned inventories at 343 reais ($147) a bag at the end of March. If all the contracts are exercised, stockpiles would increase by 3 million bags.

With the Brazilian harvest still five months away, the crop remains at risk of drought damage, said Thiago Cazarini, the president of Cazarini Trading Co. in Varginha, Minas Gerais, the nation’s largest arabica-growing state. An outbreak of leaf rust, a crop disease, already reduced output from Costa Rica, Guatemala, Honduras and El Salvador.

Yields also may fall short of forecasts as lower prices encourage growers to cut farming costs. Luz Marina Trujillo Stewart, 60, whose family has grown coffee for more than a century, said she will use less fertilizer at her 726-acre plantation outside of San Jose, Costa Rica.

“We’re in a crisis zone for producers worldwide,” said Christian Wolthers, the president of Wolthers America, an importer in Fort Lauderdale, Florida. “Historically, governments and private initiative tend to unite in such situations to help stop falling prices.”

Profit Margins

Lower costs for beans will help boost operating profit margins for Seattle-based Starbucks, the largest coffee-house chain, by as much as 2 percentage points in the fiscal year that began Oct. 1, after rising to 16.5 percent in fiscal 2013, Chief Financial Officer Troy Alstead said on an earnings call Oct. 30. The company in May cut prices for some of its packaged coffee sold in U.S. grocery stores.

Half of the improvement in profit margins this year at Waterbury, Vermont-based Green Mountain (GMCR), the maker of Keurig single-serve brewers, was from cheaper beans it buys from more than 25 countries, CFO Frances Rathke said on a call with investors and analysts Sept. 10. The shares rose 46 percent in New York this year.

“I don’t want to underestimate or minimize the amount that we’re getting” from lower coffee costs, Chief Executive Officer Brian P. Kelley said on the call. “We’re thrilled to have it, and we’ll have it next year as well.”

Crop Expansion

Prices are dropping because farmers are now seeing the payoff of their investments in trees, fertilizer and improved growing techniques after coffee more than doubled from about $1.30 a pound in mid-2010 to a peak of $3.089 in May 2011.

The number of trees planted in 2013 in Minas Gerais state, which accounts for more than half of Brazil’s coffee output, climbed by 78 million to 3.91 billion, from 3.832 billion a year earlier, according to Conab, the government crop-forecasting agency. In the past five years, yields in the country averaged 22.326 bags per hectare, 24 percent more than the five-year average of 18.026, government data show.

Brazilian farmers will collect in 2014 the high-yielding crop of the biennial harvest, which alternates between a high and low cycle. Plants typically start their productive life after three years, while pruning limbs is typically done to boost yields.

Colombia, Vietnam

In Colombia, the second-largest arabica producer, output will rise to the highest since 2007, according to the National Federation of Coffee Growers. Yields will gain next year after farmers replaced old trees with disease-resistant varieties that are now bearing fruit, said Luis Fernando Samper, chief communications and marketing officer at the Bogota-based group.

Vietnam, the largest grower of robusta beans, will reap 28 million bags in 2013-2014, matching the record in 2011-2012, according to Olam International Ltd., one of the top three suppliers of all coffee varieties. That includes about 1 million bags of arabica.

“You have a lot of coffee from Vietnam to Brazil,” said Rodrigo Costa, a trading director at Caturra Coffee Corp. a dealer in Elmsford, New York. “Even if producers reduce investments, they typically have reserves of inputs such as fertilizers for a year. Unlike grain crops, coffee production does not respond as quickly to a change in prices because of the lifecycle of trees that are already planted.”