Coffee futures re-approach 15-month low as record Brazil crop weighs

Forexpros - Coffee futures resumed their downward trend on Wednesday, moving closer to last week’s 15-month low as speculation of a record Brazil crop continued to dampen sentiment on the commodity.

On the ICE Futures Exchange, Arabica coffee for May delivery traded at USD2.0403 a pound during European afternoon trade, shedding 0.79%.

It earlier fell by as much as 1.1% to trade at a session low USD2.0353 a pound.

Last week, coffee prices dropped below the USD2.00-a-pound level for the first time since November 2010 as traders eyed a huge harvest in top grower Brazil and speculators pushed prices lower.  

German coffee trader Neumann Kaffee Gruppe on Tuesday forecast Brazil's upcoming 2012-13 Arabica coffee crop to reach 55.0 million bags.

That would exceed a record 48.5 million bags in 2002. A bag of coffee weighs 60 kilos (132 pounds). Most coffee harvesting in Brazil starts in May.

Brazil is the world's largest producer and exporter of Arabica coffee. Arabica is grown mainly in Latin America and brewed by specialty companies.

The record Brazil crop prompted commodity heavyweights Goldman Sachs and Barclays Capital to downgrade their respective average coffee price outlooks.

In a report published Tuesday, Goldman cited “expectations for record production from Brazil” as the main factor behind its bearish view on the bean.

“Going forward, we expect the 2012-13 supply response to recent high coffee prices will likely generate a surplus under average weather conditions," the report said.

Separately, BarCap said prices were poised for further declines in the near-term, weighed by an anticipated record crop from Brazil, an easing in consumption growth from emerging market economies and a weaker La Nina weather pattern.

Prices found some support after the International Coffee said world coffee consumption rose nearly 2% to an estimated 136.5 million bags in 2011, citing growing demand from emerging markets.
 
“This increase can be attributed to growing demand in emerging markets, rising domestic consumption in exporting countries and the resilience of coffee consumption to the current economic crisis,” the ICO said in a report.

The ICO noted that future demand prospects for coffee continue to be promising, citing the growth of niche markets in traditional consuming countries and the arrival of new consumers in emerging markets and exporting countries.

Elsewhere, on the ICE Futures Exchange, cotton futures for May delivery shed 0.25% to trade at USD 0.9273 a pound, while sugar futures for March delivery rose 0.67% to trade at USD0.2555 a pound.