Bloomberg News

Coffee Gains Most in 8 Weeks on Supply Risk; Orange Juice Drops

June 27, 2013

Arabica-coffee futures headed for the biggest gain in eight weeks on concern that a possible strike by farmers will disrupt supplies from Colombia, the world’s second-biggest grower. Orange juice fell.

Producers in the Colombian region of Caldas will meet July 3 to decide whether to stage protests to demand higher subsidies from the government as prices for the commodity have fallen below production costs, Oscar Gutierrez, a regional coordinator for a growers group, said yesterday in a telephone interview. As of June 18, money managers held the biggest net-bet on a price drop since March, government data show. Through yesterday, futures sank 18 percent this year amid ample supplies.

“The strike in Colombia is supporting prices because it could disrupt exports,” Hernando de la Roche, a senior vice president at INTL FCStone in Miami, said in a telephone interview. “This may encourage funds to cover shorts.”

Arabica coffee for September delivery climbed 3.2 percent to $1.2225 a pound at 11:25 a.m. on ICE Futures U.S. in New York. A close at that level would mark the biggest gain since May 2.

Production costs in Colombia are currently estimated at $1.60 a pound, while Central American growers can farm coffee for $1.45 a pound, according to Kona Haque, a London-based analyst at Macquarie Group Ltd., Australia’s biggest investment bank. Brazil is the biggest grower.

From Oct. 1 through June 24, the Colombian government gave a total of 411 billion pesos ($213 million) in subsidies to producers, according to data from the country’s National Federation of Coffee Growers, or Fedecafe. The funds reached a total of 288,745 of the nation’s 560,000 farmers, Martha Sanchez, a spokeswoman at the Federation said in a telephone interview from Bogota.

Orange-juice futures for September delivery slid 0.4 percent to $1.273 a pound. A close that level would mark the ninth consecutive decline, the longest slide since July 23.

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

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


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