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Coffee price soars on Brazil’s drought

Arabica-coffee futures on ICE Futures US jumped to a two-year high, with March-delivery beans ending 8.4% higher at $2.0065 a pound. The more actively-traded May-delivery contract rose 9.1% to $2.0240 a pound, reports the WSJ.

Coffee prices have rallied 81% since the start of 2014, as growers and analysts slashed their forecasts for Brazil’s harvest later this year.

Even with recent rains, temperatures have been so high that the water evaporates quickly, analysts say.

That combination could stunt the growth of cherries that are already on the trees but haven’t yet matured, and stress trees, threatening next year’s crop.

Brazil accounts for around one-third of the world’s annual coffee output, and it produces a wide variety of beans, from robusta used in instant coffee to higher-end varieties of arabica coffee that end up in gourmet blends.

The dry weather has pushed prices higher in several agricultural futures markets this year. Brazil also supplies more than half of the world’s orange juice, according to the US Department of Agriculture.

“The issue is the markets have become highly concentrated in relying on a few key suppliers and sometimes, some things happen and that’s the risk,” said Panama-based Judy Ganes, president of J Ganes Consulting.

Futures of frozen orange-juice concentrate rose to a 23-month high, with the March contract up 0.6%, ending at $1.5550 a pound.

Raw-sugar prices also rose to a four-month high of 18.23 cents a pound, with the May contract ending 2.8% higher.

A lack of moisture could reduce fruit size, said Ibiapaba Netto, executive director of the National Association of Citrus Juice Exporters, or CitrusBR, a Brazilian citrus-industry association, because orange trees will use the fruit’s water content to stay healthy.

“There’s no doubt that this is not the perfect situation,” he said, adding that citrus trees are more resilient to low moisture than other crops like corn.

Cocoa for May rose 0.5% to $2,970 a ton, while cotton for May delivery fell 0.7% to end at 88.61 cents a pound.

Source: Wall Street Journal

Heads up, coffee junkies: A cup of joe is about to get more expensive

Smart coffee junkies will buy an additional bag or two of coffee beans the next time they go shopping because it won’t take long for a drought in Brazil to push up retail prices.

Brazil supplies about one-third of the world’s coffee fix, and the expected shortage in high-grade beans is already percolating on commodity markets. After two-and-a-half years of declines, coffee futures are rising — up 43 percent since January 29. If prices keep increasing at their current pace, coffee will hit a record high by the end of April….

Bloomberg BusinessWeek: Read the full article