Bloomberg News

Coffee Rallies on Supply Concerns; Sugar Advances; Cotton Falls

December 20, 2011

Dec. 20 (Bloomberg) -- Coffee climbed to a one-week high in New York on forecasts for declining output in Brazil and Colombia, the biggest producers of arabica beans. Sugar and orange juice also advanced, while cotton declined.

Brazil’s coffee crop, which follows a two-year cycle, will be “considerably” smaller in the next season than in the previous high-yielding year, according to Volcafe, a unit of commodities trader ED&F Man Holdings Ltd. Colombia will produce 8.5 million bags in the year that started Oct. 1, according to a unit of the U.S. Department of Agriculture, 2 million less than a June estimate.

“With very little stocks at the hands of producers, there is little incentive to sell,” Kona Haque, an analyst at Macquarie Group Ltd. in London, wrote in a report yesterday. “Macquarie no longer expects a large 2011-12 arabica surplus, but more balanced conditions instead.”

Arabica coffee for March delivery gained 1.5 percent to settle at $2.228 a pound at 2 p.m. on ICE Futures U.S. in New York, after touching $2.2405, the highest since Dec. 13. The commodity has fallen 7.4 percent this year.

“New estimates for the Brazilian production in the 2012-13 crop keep being released, and none of them see a number much higher than 55 million bags,” Rodrigo Costa, a coffee-market specialist, wrote in an e-mailed report today for Sao Paulo- based Archer Consulting.

A bag weighs 60 kilograms, or 132 pounds. Arabica beans, grown mainly in Latin America, are favored for specialty beverages such as those made by Starbucks Corp. Robusta, used in instant coffee and espresso, is harvested mostly in Asia, Brazil and parts of Africa.

Raw-sugar futures for March delivery rose 1.7 percent to 23.49 cents a pound on ICE. Orange-juice futures for March delivery gained 0.2 percent to $1.645 a pound in New York.

Cotton futures for March delivery fell 0.3 percent to 86.8 cents a pound on ICE. The fiber is down 40 percent this year.

In London futures trading, robusta coffee and refined sugar rose on NYSE Liffe.

--Editors: Daniel Enoch, Steve Stroth.

To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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