Arabica Coffee Futures Near 14-Year High

By Leslie Josephs
The Wall Street Journal

March 8, 2011

Arabica coffee futures hit a nearly 14-year high, as a pound of unroasted beans fetched nearly as much as a cup of brewed gourmet coffee.

Worries that scarce supplies won't be able to keep up with increased demand sent arabica for May delivery up 3.1% to settle at $2.8115 a pound on the IntercontinentalExchange, the highest price since 1997.

The front-month contract, for March delivery, ended up 3% at $2.8095 a pound.

Bad weather in Central America and Colombia have kept prices high, with Arabica coffee prices rallying more than 46% over the past six months.

On Monday, few shipments out of top coffee producer Brazil helped fuel the surge in prices. Shipments have waned because of the Carnival holiday.

"There's not too much selling around so that gives it more upside potential," said Rodrigo Costa, an analyst with brokerage Newedge.

The International Coffee Organization has said global supplies likely would rise 9.5% this year because of higher forecast output from major grower nations' next harvest.

But a smaller, "off-cycle" crop out of Brazil expected this year coupled with Brazilians' increased demand for high-quality coffee have kept prices firm.

ICE-certified stockpiles in warehouses, often considered a last resort for roasters, are at a nearly 11-year low at 1.58 million 60-kilogram bags, another indication of high demand.

Major coffee roasters, including Kraft Foods Inc. and J.M. Smucker Co., already have raised prices this year on some of their products because of the rising price of unroasted coffee.

Representatives from both companies said Monday that they had no information about new price adjustments.

Starbucks Corp. Chief Executive Howard Schultz told The Wall Street Journal that he had no immediate plans for across-the-board price increases.