Coffee-bean prices sag
By Leslie Josephs
March 17, 2013
NEW
YORK—Mounting stockpiles of arabica coffee around the world have soured
traders' outlook on the commodity, pushing prices down to a 33-month low.
Arabica
coffee in 60-kilogram (132-pound) sacks stored in exchange-certified warehouses
rose to more than 2.74 million bags Friday, up 6.7% from the start of the year.
Beans
are also accumulating in Brazil, the source of about one-third of the world's
coffee. Growers there have been holding back some of their crop, waiting for
higher prices. According to Safras & Mercado, a Brazilian consulting firm,
farmers there had sold 71% of their 2012 crop by the end of February, down from
87% at the same point last year.
"There's
too much Brazilian [coffee], too much arabica," said Thiago Cazarini, a
coffee broker based in Varginha, Brazil. He estimated prices will drop to
$1.30-$1.35 a pound.
Arabica
coffee for delivery in May on the ICE Futures U.S. exchange fell 2.15 cents, or
1.5%, to $1.375 a pound, the lowest settlement for the active-month contract
since June 10, 2010. The thinly traded March-delivery contract lost 2.4 cents,
or 1.7%, to end at $1.365 a pound. The front-month contract fell 4.8% for the
week.
"The
market is just death warmed over," Jack Scoville, a vice president at
Price Futures Group, said about futures prices.
The
market has been struggling with heavy supplies for some time. Global supplies
of coffee in the 2012-13 crop year, which started in October, are expected to
outpace demand by 2.2 million bags, largely due to increased output from
Colombia, the International Coffee Organization said.
Colombia
is the largest producer of mild, washed arabica beans, a variety coveted by
gourmet roasters.
Tens
of thousands of coffee growers there went on strike for close to two weeks in
late February and early March to protest dropping prices, blocking roadways to
demand more aid from the government.
The
quasigovernmental Colombian Federation of Coffee Growers, which oversees the
industry, said Friday it would more than double the subsidy for each
125-kilogram bag of parchment coffee—unroasted coffee with a thin layer of skin
on the bean—to 145,000 pesos ($80.44).
The
move is expected to spur sales of beans from the country, where production rose
9.5% last month from a year earlier.
"Sales
were delayed," said Hernando de la Roche, a senior vice president at
brokerage INTL FCStone. "I think [the subsidy] is a factor that [traders]
are looking at."
On
top of Colombia's bright forecast, Brazil is expected to produce another large
harvest following record 50.83 million bags harvested in 2012.
Sterling
Smith, a futures specialist at Citigroup,
C -0.42% called the oversupply
"an anchor on the market."
"There's
not a lot of reason to be aggressively buying arabica right now," he said.
—
Jeffrey
T. Lewis in São Paulo contributed to this article.
Write to
Leslie
Josephs at leslie.josephs@dowjones.com