Arabica Coffee Posts Biggest Gain Since 2004 on Brazil Drought
Arabica coffee extended its bull-market advance, posting the biggest gain in more than nine years, as drought drains dams to a record low in Brazil, the world’s biggest grower and exporter.
Dry weather will persist through Feb. 20 in the country’s southeast, the main growing region, according to Celso Oliveira, a meteorologist at weather forecaster Somar Meteorologia. Rains expected late this month and in March won’t be enough to fill reservoirs before the dry season starts in April, he said. Prices jumped 19 percent in five sessions, the biggest such advance since June 2010.
Coffee has surged 23 percent in 2014, heading for the best start to a year since 1997. Brazil had the hottest January ever and the least rain for the period in 20 years, according to Marco Antonio dos Santos, an agronomist at Somar. The drought is also driving prices higher for sugar and orange juice.
“Dryness in Brazil’s coffee-growing area is something that will propel the market higher,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “Not enough rain is stressing the trees.”
Arabica coffee for March delivery jumped 8.6 percent to settle at
$1.3595 a pound yesterday on ICE Futures U.S. in New York, the biggest increase since November 2004. On Jan. 31, the commodity settled at $1.252, up 23 percent from a closing low in November and entering a bull market. Prices reached $1.364, the highest since May 20.
The Standard & Poor’s GSCI Agriculture Index of eight contracts rose for a fourth day to 351.1961, the best run since Nov. 12 and the highest level since Jan. 16. Cocoa futures for March delivery increased 0.1 percent to $2,914 a metric ton on NYSE Liffe in London yesterday.
Global Output
In 2013, coffee fell 23 percent, the third straight drop and the longest slump since 1993, amid bumper crops in Brazil and Colombia, the second-largest arabica grower.
This year, global output will outpace demand for the fourth straight season, according to the U.S. Department of Agriculture.
Arabica is grown mainly in Latin America and brewed by specialty companies including Starbucks Corp.
Robusta-coffee futures for May delivery climbed 3.4 percent to $1,839 a ton yesterday in London, after touching $1,856, the highest since Aug. 21.
http://www.bloomberg.com/news/2014-02-03...ought.html
Expect cost of goods for SBUX to increase due to increase in price for Arabica coffee beans in 2014.