Bloomberg News

Coffee May Extend Gains on Rain in Latin America, Goldman Says

December 01, 2011

Dec. 1 (Bloomberg) -- Arabica coffee prices may extend gains as rain disrupts supplies from Colombia and Central America, Goldman Sachs Group Inc. said.

Coffee will be at $2.35 a pound in three months, the bank forecast in a report dated today. “We see risk to our short- term price forecast as skewed to the upside,” Damien Courvalin, an analyst at Goldman, said in the report. Prices have climbed 5.2 percent on ICE Futures U.S. in New York over the past month.

“Colombia has revised its production estimate lower for 2011 for the second time in two weeks on disease outbreak and adverse weather,” Courvalin said. “Recent torrential rains in Central America have likely caused damage to both the local crops and infrastructure.”

Colombia’s crop will be about 8 million bags in 2011, according to Luis Munoz, chief executive officer of Colombia’s National Federation of Coffee Growers. Output next year may not increase if adverse weather persists, he said yesterday.

The return of the La Nina weather pattern, a cooling of the Pacific Ocean that can affect weather around the world, may damage production in Brazil, the world’s largest producer of coffee, Goldman’s Courvalin wrote.

Prices may fall to $2 a pound in six months and to $1.75 cents a pound in 12 months, according to the report.

“We expect a continued supply response to the current high coffee prices during the 2012-13 crop year,” Courvalin said.

Arabica coffee for March delivery was down 0.4 percent to $2.359 a pound by 6:20 a.m. on ICE Futures U.S. in New York. Arabica is grown mainly in Latin America and favored by Starbucks Corp., the world’s largest coffee shop owner.

--Editors: Claudia Carpenter, Sharon Lindores

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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