Coffee Drops on Ample Supplies, Stronger Dollar; Cocoa Climbs

By Elizabeth Campbell

May 24 (Bloomberg) -- Coffee prices slipped amid signs of ample supplies in Brazil, the world’s largest producer and exporter, and as a rising dollar reduced the appeal of some commodities. Cocoa futures gained.

The dollar rose as much as 1.3 percent against a basket of major currencies. Brazil’s coffee output will rise 23 percent in the year starting July 1 as trees enter a more-productive phase of a two-year cycle, the U.S. Department of Agriculture said in a report posted last week.

“We’ve had the dollar up really strong today,” said Tom Mikulski, a senior market strategist at Lind-Waldock, a broker in Chicago. “That’s definitely not going to help. We’ve also had an enormous estimate coming out of Brazil. That’s been really, really holding that market down.”

Arabica-coffee for July delivery declined 0.15 cent, to 0.1 percent, to $1.3225 a pound on ICE Futures U.S. in New York. The commodity has slipped 2 percent in the past 12 months.

A cold front may damage Arabica-coffee plantations in some parts of Minas Gerais, Brazil’s biggest coffee-producing region, said Expedito Rebello, the head of research at the government’s Meteorology Institute, known as Inmet.

Cocoa for July delivery rose $20, or 0.7 percent, to $2,915 a ton in New York. The chocolate ingredient has declined 11 percent this year.

Technical Support

“There’s a real nice technical pattern on the cocoa market,” said Phil Streible, a senior market strategist at Lind-Waldock in Chicago. “Probably the most supportive factor of the cocoa market right now is just that the technicals are really strong, signaling some type of recovery.”

On London’s Liffe exchange, cocoa futures for July delivery rose 24 pounds, or 1 percent, to 2,339 pounds ($3,381) a ton, for its sixth straight gain. Robusta-coffee futures for July delivery dropped $4, or 0.3 percent, to $1,330 ton.

Arabica coffee is grown mainly in Latin America and brewed by specialty companies including Starbucks Corp. Robusta beans, used in instant coffee, are harvested mostly in Asia and parts of Africa.