Arabica-coffee prices jumped to a more than three-week high on Tuesday as investors piled back into the market amid concerns about the yields of Brazil’s harvest.
Brazil, the source of more than half of the world’s arabica coffee, experienced its worst drought in decades earlier this year, which has reduced the size of the current harvest. Growers say systemic damage to the trees could limit next year’s crop as well. Current dry weather in Brazil’s coffee-growing areas is normal, but the lack of rain is prompting more investors to bet on higher prices, traders and analysts said.
“The picture in general might deteriorate,” said Rodrigo Costa, coffee director at brokerage Newedge in New York. “After the harvest, the trees are not looking good at all.”
Arabica coffee for delivery in December on the ICE Futures U.S. exchange was recently 4.2% higher at $1.9560 a pound, the highest intraday level since Aug. 1.
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.
“You never really know the size of the crop until you see the export numbers out of Brazil, but the market never waits for that,” Mr. Costa said. So far, it has “the feeling of a smaller crop.”
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.
In other markets, orange juice for delivery in November was recently 0.2% lower at $1.4415 a pound, and cocoa for December delivery was down 0.5% at $3,203 a ton. October-delivery sugar rose 0.7% to 15.46 cents a pound, and cotton for December delivery was 0.2% higher at 66.29 cents a pound.
Source: Wall Street Journal