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Coffee Futures Fall on Expectation of Bigger Crops; Orange Juice Slips

June 19th, 2009

Coffee futures fell, capping the biggest weekly drop since December, on speculation that global output will be higher than forecast. Orange juice also declined.

The coffee crop in Brazil, the world’s largest producer, may be 15 percent to 20 percent greater than projected, said Bill Adams, the chief investment officer at Intermarkt Investment Strategies. India’s crop, the third-biggest in Asia, will jump 17 percent to a record next season after rainfall boosted yield prospects, the state-owned Coffee Board said today.

“The crops in Brazil and Colombia are not having the challenges we thought they were going to have,” Adams said by telephone from Zurich. “Asia is having a really good season.”

Arabica-coffee futures for September delivery fell 3.15 cents, or 2.6 percent, to $1.197 a pound on ICE Futures U.S. in New York. Earlier, the price touched $1.189, the lowest for a most-active contract since May 1. The commodity tumbled 9.1 percent for the week, the steepest such decline since Dec. 5.

Arabica coffee traded in New York may fall to $1.066 a pound by the end of September, Adams said.

Global coffee production was projected to drop 5.4 percent, to 127.443 million bags in the next marketing year by the Foreign Agricultural Service of the U.S. Department of Agriculture. The forecast cited a decline in Brazil’s output.

Farmers in Brazil may collect 43.5 million bags of coffee in the 12 months starting July 1, 15 percent less than the current season’s harvest, as trees enter the less-productive phase of their biennial cycle, the USDA unit said last week. A bag weighs 60 kilograms, or 132 pounds.

Vietnam Outlook

Rain in Vietnam this month may ease concern that earlier adverse weather damaged coffee crops in the world’s largest producer after Brazil, according to Sept. 2nd Import-Export Co., one of the nation’s three biggest exporters by volume. Vietnam is the world’s biggest producer of robusta varieties.

Coffee has climbed 6.8 percent this year in New York amid tight supplies from Central America and from Colombia, the third-biggest producer.

In London, robusta coffee for July delivery sank $93, or 6.5 percent, to $1,344 a metric ton on the Liffe exchange. Robusta is down 12 percent for the week, the steepest such decline since March 2008.

In another ICE market, orange-juice futures for September delivery slid 0.85 cent, or 1 percent, to 80.4 cents a pound. The most-active contract dropped 6.3 percent for the week, the biggest such drop since Jan. 16.

The price has slumped for three straight weeks as rain revived dry groves in Florida, the world’s largest producer after Brazil. The state’s harvest usually begins in October.

“A hurricane will start all this concern and there may be some buying interest,” Adams said. “There’s no demand in this market except for standard protection” against the Atlantic Ocean hurricane season, he said. The hurricane season began June 1 and usually ends by Nov. 30.

The most-active orange-juice contract still has advanced 18 percent in New York this year.

 - Yi Tian in New York at Bloomberg. 

See Also: Coffee, Cocoa, Cotton, Orange Juice, Sugar

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