Coffee Slumps to Two-Week Low on Greater Output in Brazil; Cocoa Declines

Coffee prices in New York fell the most since November on speculation that global supplies will increase as production jumps in Brazil, the world’s largest grower. Cocoa also dropped.

Brazil’s coffee output may total 47 million bags this year, up 19 percent from a year earlier, as trees enter the higher- yielding phase of a two-year cycle, according to the Agriculture Ministry. No frost is forecast for coffee-growing areas through July 9, the government’s weather agency said on its website.

“Fundamentals are bearish,” said Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago. “The Brazilian crop is expected to be big, and there’s no news, like threat of freezing temperatures, to push prices up. Coffee has lost its upside momentum.”

Arabica coffee for September delivery fell 6.65 cents, or 4 percent, to $1.5765 a pound on ICE Futures U.S. in New York, the biggest loss for a most-active contract since Nov. 10. Earlier, the price reached $1.5685, the lowest level since June 18. Futures are down 11 percent since reaching a 12-year high on June 24.

On London’s Liffe exchange, robusta-coffee futures for September delivery dropped $60, or 3.5 percent, to $1,650 a metric ton, after touching $1,643, the lowest price since June 24.

Arabica coffee, a variety grown in Brazil and brewed by companies such as Starbucks Corp., may fall as low as $1.50 a pound by the end of the week, Cruel said.

Further Drop Predicted

Robusta beans, used mostly in instant coffee, are harvested mostly in Asia and parts of Africa. Each bag weighs 132 pounds, or 60 kilograms.

Arabica prices surged as much as 31 percent since the end of May to $1.765 on June 24. Robusta jumped as much as 34 percent in the same period.

“On the way up, there was a lot of panic buying and short- covering,” Angus Kerr, owner of trading company Coffee ag in Cobham, England, said by telephone, referring to purchases that closed bets on falling prices. “The market has further to come down before it consolidates.”

Cocoa for September delivery slipped $4, or 0.1 percent, to $2,967 a ton in New York. On London’s Liffe, cocoa futures for September delivery dropped 6 pounds, or 0.3 percent, to 2,394 pounds ($3,627) a ton.

To contact the reporters on this story: Yi Tian in New York at ytian8@bloomberg.net; M. Shankar in London at mshankar@bloomberg.net