Coffee Sinks to 19-Month Low as Brazil Real Falls on Junk Rating
By Marvin G. Perez
(Bloomberg) -- Coffee slumped to a 19-month low as further depreciation of the Brazilian real spurred speculation that the world`s top producer will step up output and exports.
The price of arabica beans, the type favored by Starbucks Corp., slid as much as 4 percent Thursday to the lowest intraday since Jan. 29, 2014. Arabica for December delivery tumbled 3.9 percent to settle at $1.164 a pound at 1:33 p.m. in New York on ICE Futures U.S.
The commodity is down 30 percent so far in 2015, a turnaround from last year when it surged 50 percent after a drought hurt Brazilian plantings. On Wednesday, Standard & Poor`s downgraded its sovereign credit rating for the country to junk with a negative outlook, sending the real to its lowest against the dollar in more than 12 years.
The weaker currency will be negative for coffee prices, “as it has for some time, as it encourages more exports and possibly more production,” Paul Christopher, the St. Louis-based international strategy for the Wells Fargo Investment Institute, which oversees $1.7 trillion, said in a telephone interview.
Currency devaluations this year in Colombia, Indonesia and Vietnam -- all major coffee producers -- also have raised expectations for additional supplies. Another factor weighing on coffee is the higher rainfall this year in Brazil.
Ample rain in the next seven days across Brazil`s growing areas will probably spur more blooms for next harvest, said Kenny Miller, meteorologist at MDA Weather Services in Gaithersburg, Maryland. In Colombia, output may top a U.S.
government estimate as yields gain after plantations were rejuvenated, according to Roberto Velez, the chief executive officer of Colombian Coffee Growers Federation.
“In general, there`s no good news, with the rain helping blooms and the Colombian crop story also putting pressure” on prices, Hernando de la Roche, senior vice president for INTL FCStone in Miami, said in a telephone interview.
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- Coffee Prices
New York: 138.85 (-0.35) London: 2,168 (-18) Đăk Lăk: 46,800 (-400) USD Index: 99.83 (+0.12) CRB Index: 184.07 (+0.98)
- Rubber Prices
Tocom: 245.5 (+1.5) Shanghai: 16,615 (+315) Oil: 48.63 (+0.26) Yen Index: 90.00 (-0.39) DJones: 20,614 (-11.00)