By Adam Cancryn The Wall Street Journal
October 21, 2010
Coffee futures broke through the $2-a-pound level for the first time in 13 years as concerns about weather exacerbated a scramble to secure supplies.
A shortage of arabica beans, desired for their mild taste, has been evident in global markets for years, and futures are now catching up with the high prices that have prevailed at South and Central America's shipping ports.
Arabica coffee for December delivery hit a high of $2.0315 a pound on ICE Futures U.S. during intraday trading on Thursday. That is up 6.4 cents, or 3.3%, on the day, and the highest point since Sept. 18, 1997.
Prices have been climbing since June as heavy rains brought on by a string of Caribbean storms dampened optimistic output forecasts released earlier this year. The wet weather cut into yields and diminished the quality of the region's existing beans.
"It's a scarcity issue that continues to get worse," said Shawn Hackett, the president of Hackett Financial Advisors. "You can't just snap your fingers and turn production around."
Stockpiles certified as deliverable against the futures contract stood at slightly more than 1.8 million bags, each weighing 60 kilograms, this week. This is a decline of 44% compared with the same period last year. Firms that purchase raw, green coffee and roast it are dipping into the stores of older beans to help meet demand, analysts say, but so-called roasters are limited in how many lower-quality beans they can mix into their products without spoiling the taste.
Some roasters such as Starbucks Corp. have already reacted to the surge in coffee futures by raising prices on drinks, and more such increases are expected.
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Write to Adam Cancryn at Adam.Cancryn@dowjones.com
October 21, 2010
Coffee futures broke through the $2-a-pound level for the first time in 13 years as concerns about weather exacerbated a scramble to secure supplies.
A shortage of arabica beans, desired for their mild taste, has been evident in global markets for years, and futures are now catching up with the high prices that have prevailed at South and Central America's shipping ports.
Arabica coffee for December delivery hit a high of $2.0315 a pound on ICE Futures U.S. during intraday trading on Thursday. That is up 6.4 cents, or 3.3%, on the day, and the highest point since Sept. 18, 1997.
Prices have been climbing since June as heavy rains brought on by a string of Caribbean storms dampened optimistic output forecasts released earlier this year. The wet weather cut into yields and diminished the quality of the region's existing beans.
"It's a scarcity issue that continues to get worse," said Shawn Hackett, the president of Hackett Financial Advisors. "You can't just snap your fingers and turn production around."
Stockpiles certified as deliverable against the futures contract stood at slightly more than 1.8 million bags, each weighing 60 kilograms, this week. This is a decline of 44% compared with the same period last year. Firms that purchase raw, green coffee and roast it are dipping into the stores of older beans to help meet demand, analysts say, but so-called roasters are limited in how many lower-quality beans they can mix into their products without spoiling the taste.
Some roasters such as Starbucks Corp. have already reacted to the surge in coffee futures by raising prices on drinks, and more such increases are expected.
---
Write to Adam Cancryn at Adam.Cancryn@dowjones.com
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