Forexpros – Coffee futures advanced on Monday, as adverse weather conditions in top growers Brazil and Colombia underlined concerns over declining global coffee supplies.
On the ICE Futures Exchange, Arabica coffee for March delivery traded at USD2.3105 a pound during U.S. morning trade, climbing 0.62%.
It earlier rose by as much as 1.15% to trade at a daily high of USD2.3275 a pound.
The National Federation of Coffee Growers of Colombia, or Fedecafe, said that the country’s coffee output was likely to be flat in the 2011-12 marketing season that began on October 1, as heavy rains damaged coffee plants.
According to the group, Colombia’s coffee production in the current marketing year will total 8.5 million 60-kilogram bags, the same as in the previous season.
Luis Genaro Munoz, general manager of Fedcafe said, “We don’t expect to increase production. The weather this year has been worse than last year.”
The downbeat forecast comes a week after Brazilian coffee industry group Cooparaiso said that the nation’s coffee harvest in the 2011-12 season will be smaller than last year’s due to bad weather that has taken a heavy toll on trees.
Brazil is the world’s largest producer and exporter of Arabica coffee, while Colombia is the world’s second largest producer. Arabica is grown mainly in Latin America and brewed by specialty companies.
Despite the recent gain in prices, the long-term outlook remains clouded. Agribusiness financial service provider Rabobank rated coffee as its worst commodity pick for 2012, citing expectations for large harvests in Brazil and Vietnam next year.
The lender added that a price “collapse was not on the agenda, as it will take a couple of seasons to replenish global stocks and reverse the decade-long trend of falling stocks levels”.
Meanwhile, the U.S. dollar weakened against the euro after Italy unveiled a EUR30 billion package of austerity measures on Sunday aimed at reducing the country’s debt load, the second largest in the single currency bloc.
Commodity traders were also awaiting the outcome of a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel later in the day to discuss proposals ahead of Friday’s critical European Union summit meeting.
Elsewhere, on the ICE Futures Exchange, cotton futures for March delivery rose 0.5% to trade at USD 0.9231 a pound, while sugar futures for March delivery rallied 2.55% to trade at USD0.2413 a pound.
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