By Julie Wernau
Coffee prices rose Thursday on fears that dry weather in some
coffee-growing regions could lead to shortages.
Vietnam and Indonesia, the world's respective first- and
third-largest growers of robusta coffee, a bitter bean variety
typically found in coffee blends and instant coffee, warned that
dry conditions caused by the El Nino weather event are
intensifying, threatening crops there.
At least one trading firm has built up a large position in the
July robusta contract, which is traded in London, and that has some
investors anticipating higher prices and making the switch to the
more mild-flavored arabica bean, brokers said.
Arabica coffee for September delivery rose 2.3% to end at $1.249
a pound on the ICE Futures U.S. exchange.
"If you can't grab from one pile, you go and grab from the
other," said Hector Galvan, senior broker at R.J. O'Brien Futures
in Chicago. "Even though they are different types of coffee, when
you have shortfalls in one market, you'll see the other one
rally."
Rains in Vietnam have been 50% below normal over the last 90
days, according to WeatherBELL Analytics in New York, during the
country's typical wet season. Indonesia is also seeing less rains
than usual.
"The robusta in Vietnam is likely to be affected and yields are
likely to be down," said Joe D'Aleo, chief agricultural forecaster
at WeatherBELL.
In other markets, raw sugar for October fell 1.7% to 11.27 cents
a pound.
Both sugar and coffee prices have had a difficult time moving
independently against the tide of the commodity plunge, Societe
Generale said in a note Thursday. Sugar prices moved lower despite
ideas that London-traded white sugar's recent premium against the
New York raw sugar contract is a sign of increased demand.
"While there are supply-and-demand fundamental reasons for the
downtrend in sugar and coffee prices, this pressure is exacerbated
by the weakness in both the Brazilian real and the general
commodities space," the firm said. "Continued pressure in the
latter two will likely continue to keep pressure on sugar and
coffee prices for the foreseeable future."
The real fell 1.5% against the dollar Thursday, encouraging
producers in the world's largest sugar producing country to sell to
take advantage of favorable exchange rates for their dollar
denominated goods.
Cocoa for September delivery rose 0.1% to close at $3,221 a ton,
cotton for September slumped 0.5% to end at 63.55 cents a pound and
frozen concentrated orange juice for September ended flat at $1.228
a pound.
Write to Julie Wernau at julie.wernau@wsj.com
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