24/08: ICE Coffee Tumbles 8.1% As Funds Sell

1354 EDT [Dow Jones] - Coffee on ICE Futures US tumbled in a technical
correction after the market had become overbought near 13-year highs and as
fund traders sold commodities due to renewed economic fears. Coffee futures had
reached levels considered too high, particularly with a potentially record crop
in Brazil and larger crops in Colombia and Central America around the corner, a
trader says. London robusta coffee also fell, with nearby September down 7.9%.
ICE September coffee fell 14.65 cents, or 8.1%, to $1.6685 a pound. Most active
Dec lost 14.80 cents, or 8.1%, to settle at $1.6845.

Coffee Slides Most Since 2008 on Concern Economic Recovery is Faltering

Coffee declined the most in more than two years as equities tumbled on concern that the economic recovery may be weakening, driving most commodities lower.

The Reuters/Jefferies CRB Index of 19 raw materials plunged as much as 1.4 percent, which would be the biggest drop since June 29, and oil fell below $72 a barrel for the first time in almost seven weeks. Yesterday, coffee reached $1.8865 a pound, the highest level since Sept. 11, 1997.

“There is long liquidation after the market rose to a new high,” said Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago. “The weakness in the equity markets is also adding selling pressure.”

Arabica coffee for December delivery slumped 12 cents, or 6.6 percent, to $1.7125 a pound at 9:47 a.m. on ICE Futures U.S. in New York. A close at this price would mark the biggest decline for a most-active contract since March 2008. Before today, the commodity advanced 35 percent this year on concerns that demand would outpace supplies.

On London’s Liffe exchange, robusta-coffee futures for November delivery retreated $147, or 8.3 percent, to $1,630 a metric ton, the biggest drop since at least January 2008.

A lower close after a high is a “very negative signal,” according to Doug Whitehead, an analyst at Rabobank International in London. “With such a weak technical signal, you would think that would prompt additional selling, as producers and traders might find prices could head lower for the next few days.”

The Dow Jones Industrial Average and the S&P 500 Index dropped both dropped as much as 1.4 percent.

Coffee futures flirt with 13-year high on crop troubles

Retail price hikes lag, but supermarket prices could rise up to 10%

A previous version of this story incorrectly characterized Monday's settlement for coffee futures as the highest since September 1997. The story has been corrected.

SAN FRANCISCO (MarketWatch) -- Arabica coffee futures came off a nearly 13-year high on Monday, but traders say tight supplies are likely to keep prices of the better-quality bean elevated.

Coffee prices have increased 34% this year as recent crops from Colombia and countries in Central America were dogged by poor weather. Concerns about Brazil's upcoming crop also pulled in buyers.

Reuters

As prices soar in the futures markets, U.S. coffee producers have been bracing for higher coffee purchase costs. Some have already increased their prices.

Demand for coffee, however, is generally seen as impervious to higher prices -- coffee drinkers usually only change their purchasing habits if prices rise significantly.

Coffee for December delivery, the most active contract, declined 2 cents, or 1%, to settle at $1.83 a pound on ICE Futures U.S. on Monday. Earlier, they rose to an intraday high of $1.89 a pound.

They settled at $1.85 a pound on Friday, the highest settlement since September 1997. Coffee prices hit a record in May 1997, when prices hit $3.18 a pound.

A small exchange-traded note that tracks coffee futures, the iPath Dow Jones UBS Coffee Subindex Total Return ETN /quotes/comstock/13*!jo/quotes/nls/jo (JO 46.93, -2.62, -5.29%) , by Friday had topped Morningstar's list of best-performing exchange-traded fund, excluding leveraged ETFs, over the past three months. Read ETF Investing blog on coffee futures.

"I do think coffee has a very, very good chance of hitting $2 a pound," said Sterling Smith, an analyst with Country Hedging Inc. in St. Paul, Minn.

Supplies from Colombia are still tight, and it's not clear whether the Brazilian crop can lessen concerns about the precarious supply situation overall, he said.

Moreover, coffee is a cyclical crop, and even-year crops are usually smaller than odd-year crops, he added.

Prices gained earlier Monday as traders worried about Tropical Storm Danielle bringing more rain to Mexico and Central America. But Danielle, likely to be upgraded to a hurricane later on the week, is expected to miss most of the key coffee-growing regions in Mexico and nearby.

Richer brew

Americans don't seem to worry about paying more for coffee, Smith said. Demand cools as prices rise in most commodity markets, but coffee consumption only gets hit if prices increase "a great deal," he added.

He estimated that prices would have to run up to $3 per pound to cause Americans to stop buying as much coffee or start migrating to cheaper brands.

Higher prices already are a reality. J.M. Smucker /quotes/comstock/13*!sjm/quotes/nls/sjm (SJM 59.23, -0.57, -0.95%) , best known for its namesake jams, boosted retail prices by 9% for its Folgers, Dunkin' Donuts and Millstone coffee brands this month. This followed a 4% increase in May.

Kraft Foods (KFT 29.25, +0.10, +0.33%) raised prices for its Maxwell House ground coffee by 30 cents and instant coffee by 2.5 cents, on average. Sara Lee (SLE 14.65, -0.10, -0.65%) said it was raising prices but didn't specify the brands, which include Douwe Egberts and Senseo.

"We expect to see specialty coffee roasters begin raising prices later this year, as lower-priced coffee inventory is cycled," said Mitchell Pinheiro, analyst at Janney Capital Markets. "Retail coffee prices generally move in step with green coffee."

At the onset, rising commodity prices squeeze coffee producers more than the retail customer.

According to the USDA, a 10-cent increase in green-coffee bean prices, on average, trickles down to a 2-cent increase in both manufacturer and retail prices. But if the increase persists through several periods, prices rise about cent-for-cent with the commodity.

Senior market analyst Bill Patterson, with Mintel International Group, sees coffee price tags at supermarkets going up 9% to 10%.

"Whatever is going on at Kraft and Smucker, I'd be really surprised if the food service won't be forced to raise prices as well," he said. "They made the decision knowing others will follow."

Starbucks /quotes/comstock/15*!sbux/quotes/nls/sbux (SBUX 22.99, -0.69, -2.91%) said Aug. 17 it would swallow 4 cents a share in additional commodity costs in fiscal 2011, primarily due to higher coffee prices. The coffee chain noted that its purchase costs aren't necessarily linked to the commodities market because of its contracts with growers around the world.

In its Aug. 2 quarterly regulatory filing, Starbucks said it had committed to purchase an estimated $285 million of green coffee under price-to-be-fixed contracts as of June 27. Starbucks sells its premium bagged coffee at its own stores and at supermarkets, where it recently started to make an even bigger push with its Via instant coffee packets.

Retail chain and foodservice distributor Peet's Coffee & Tea (PEET 35.34, +0.32, +0.91%) said Aug. 3 it has no plans to raise coffee prices this year. At supermarkets, its packaged coffee sells at a 10% premium to other specialty coffees.

But CEO Patrick O'Dea did say Peet's would consider price increases if coffee-future prices sustain a run-up in price over the next six to nine months.

For 2010, Peet's said its coffee purchase costs will be up 2%. In January, the company had expected coffee costs to decline 1%. This price swing will "put about $1 million of cost pressures" on the balance sheet starting in the third quarter, the company has said.

Caribou Coffee Co. (CBOU 9.54, -0.02, -0.21%) said Aug. 4 it fixes the price of its green coffee contracts 12 months in advance and was able to buy coffee at costs lower than current market prices. The coffee chain said it has enough inventory through March 2011.

Rain blamed for tighter supplies

Like the recent rally in wheat prices, coffee's recent surge has stemmed from poor crop production.

Excessive rains and a cyclical rejuvenation of coffee plants have cut into Colombia's crop, which has been about 30% smaller than usual.

Colombia is the world's second largest coffee producer after Brazil, which produces about half of the world's Arabica coffee beans, the most sought-after and highest quality type of beans.

Robusta beans, mostly harvested in Asia, usually go to production of instant coffee or into cheaper coffee blends.

Concerns that Brazil is about to face dry conditions also contributed to the recent price increases.

Brazil had its own problems with last year's crop, affected by rain, said Marcio Bernardo, an analyst with Newedge USA. But even if the drought comes, coffee is a hardy plant that can tolerate some dry conditions and rains later in the season usually don't affect it, he said.

Fundamentals don't quite justify the latest price run-up, but then again the coffee market, like other commodities, is awash with speculative money making it difficult to predict where prices will go, Bernardo said.

Demand for coffee is increasing globally, Country Hedge's Smith said.

For years, Brazil grew most of the world's coffee but Brazilians, although heavy coffee drinkers, had only a passing interest in the choicest beans, which would end up exported.

That has changed as more Brazilians can afford coffee and more people have become more particular about their coffee. This trend could lead to continued higher prices in the long term as more of the best Arabica bean stays in Brazil, Smith said.

Claudia Assis is a San Francisco-based reporter for MarketWatch. Matt Andrejczak is a reporter for MarketWatch in San Francisco. Cynthia Lin is a MarketWatch reporter based in New York.

23/08: ICE Coffee Weakens; Overbought Market

Aug 23, 2010 (Dow Jones Commodities News via Comtex) -- 1435 EDT [Dow Jones] -- Coffee on ICE Futures US fell Monday as prices became top heavy at current levels near 13-year highs, encouraging light selling interest. A mixed trade in the commodity indexes also led to selling in coffee. After hitting a session peak of $1.8675, surpassing Friday's high, Sep became overbought, says Sterling Smith, analyst at Country Hedging in St. Paul, Minn. A total of 217 deliveries were made against Sep on its first-notice day, about in the middle of expectations, and were considered neutral for prices, says Alonso Tomas, trader with Hencorp Futures in Miami. Futures volume is pegged at 11,973 contracts, with 5,485 calls and 4,279 put options traded. Nearby September coffee lost 0.05 cent, or 0.03%, to $1.8150 a pound. Dec fell 1.80 cent, or 0.97%, to $1.8325.

20/08: DJ ICE Coffee Nears 13-Year High As Supplies Remain Scarce

Coffee futures shot to their highest level in nearly 13 years as nearby supplies of top-quality Arabica beans remain tight and producers scramble to acquire the beans.

Friday, coffee traded on ICE Futures U.S. for nearby September delivery hit a high of $1.8480 a pound, the strongest price since December 1997. The contract rose 4.25 cents, or 2.4%, to settle at $1.8155 a pound.

While supplies of quality Arabica beans--the kind traded on ICE--are expected to be replenished when Central America and Colombia harvest their crops in the fall, nearby supplies remain tight, forcing prices higher, said Rodrigo Costa, vice president of institutional sales at Newedge in New York.

A lack of producer selling in the lightly traded market allowed prices to climb, with traders also making purchases before the ICE delivery period against the September contract begins on Monday, said Costa.

Soaring coffee values have forced roasters to hike prices.

U.S. coffee roaster J.M. Smucker (SJM), maker of Folgers coffee, in early August raised prices by 9%, while Kraft Foods (KFT), maker of Maxwell House, increased prices more than 10%.

Coffee buyers and sellers in Brazil, the world's largest coffee producer, tread cautiously this week as local and international bean prices climb.

"Roasters are concerned about high prices and cautious about buying at such high levels," John Wolthers, a trader at coffee exporter Comexim in Santos told Dow Jones Newswires.

In Brazil--the world's No.1 coffee exporter--prices have surged in tandem with sky-high international prices on ICE Futures U.S. In Brazil's spot market, arabica coffees continued to fetch high prices thisweek. A good arabica farmgate coffee (with 16% to 18% of defects) was trading at around 330 Brazilian reals ($188) per 60-kilogram bag on Thursday, Wolthers said. This compares to around BRL230 to BRL240 a year ago.

"It's a great time to be a producer, and a difficult time to be a roaster," he said.

Roasters have been holding off from buying as coffee prices remain high, but some may need to "bite the bullet" and makes purchases.

Some buyers are fixing their coffee purchases before the September contract on ICE expires, he said.

Fernando Mellao Martini, a broker from Mellao Martini Negocios em Cafe, said high coffee prices have surprised everyone. "There's much confusion in the market," he said.

Many producers have already sold good volumes of coffee and are focusing on delivering their beans.

High-level washed coffees continue to fetch around BRL380 to BRL400 per bag, he said. But even with those high prices, some producers are wanting even higher prices, he said.

ICE Change (cents) Range
Sep $1.8155 up 4.25 $1.7740-$1.8480
Dec $1.8505 up 5.20 $1.7955-$1.8650

16/08: ICE Coffee Rises On Tight Supplies, Charts

Arabica coffee on ICE Futures US rose Monday on fund buying linked to a weak US dollar and continued tight supplies of arabica coffee beans in the marketplace, with chart strength also applying upward price pressure, a broker says. Supplies of top-quality arabica beans are extremely tight before the Central American and Colombian harvests commence in the fall.
Coffee prices will likely ease from their elevated levels once the new 2010-11 crop is available and supply concerns ease, the International Coffee Organization says. Global coffee consumption in 2009 fell by 1.5% to 128.8 million bags, from 130.7 million in 2008, the ICO says. It maintained world production for the 2010-11 crop year in a range of 133 million to 135 million bags. Coffee futures attracted chart-based buying after the September contract rallied above Friday's high on its way to a two-week top of $1.8060 a pound. Volume is pegged at 33,373 contracts, with 8,002 calls and 5,952 put options traded. Nearby September coffee on ICE rose 3.20 cents, or 1.8%, to settle at $1.7870 a pound.

10/08: Sugar Futures Rise on Russian Drought Concern; Cocoa Falls, Coffee Steady

Sugar futures climbed the most in two weeks on concern Russia’s beet production will drop because of a prolonged drought. Cocoa prices declined, and coffee was little changed.

Russian sugar-beet output may trail forecasts by as much as 20 percent, the nation’s Sugar Producers’ Union said. The country may import about 1.8 million metric tons of raw sugar in 2011, the same amount as this year. Futures in New York tumbled 6.1 percent in the previous three sessions, partly on forecasts for higher production in Brazil and India.

“The Russian news is providing some support to the market,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock, a broker in Chicago. “The sell-off has been overdone.”

Raw sugar for October delivery gained 0.83 cent, or 4.7 percent, to close at 18.56 cents a pound at 2 p.m. on ICE Futures U.S. in New York. The price has tumbled 31 percent this year.

Refined-sugar futures for October delivery increased $10.60, or 2 percent, to $534.70 a ton on the Liffe exchange in London.

Cocoa futures for September delivery fell $109, or 3.6 percent, to close at $2,930 a ton in New York, marking the biggest drop since July 19. Earlier, the price touched $2,907, the lowest level since July 22.

Exports from the Ivory Coast, the world’s biggest producer, climbed 40 percent in June, according to data supplied by the ports of Abidjan and San Pedro. President Laurent Gbagbo said last week that farmers can double their output of cocoa and coffee without hindering planting of local staple crops.

In London, cocoa futures for September delivery fell 62 pounds, or 2.8 percent, to 2,123 pounds ($3,371) a ton.

In New York, arabica-coffee futures for September delivery were little changed at $1.6965 a pound. On Liffe, robusta-coffee futures for September delivery fell $16, or 0.9 percent, to $1,708 a ton.

06/08: Falls On Commodity Sales Following Jobs Data

Arabica coffee futures for September delivery fell Friday, pressured by a weak trade in commodities on softer-than-expected economic data and favorable conditions in top grower Brazil.

Nearby September coffee on ICE Futures U.S. in New York lost 2.45 cents, or 1.4%, to settle at $1.6740 a pound.

A weaker-than-expected July jobs report caused traders to shed riskier commodity assets, and coffee fell as a result.

Nonfarm payrolls fell by 131,000 in July, the U.S. Labor Department reported, more than the 60,000 jobs analysts had expected the economy to lose.

"Everyone was kind of pinning hopes on this report because if any of the [government] stimulus was actually helping it would have showed up by now, and people kind of threw in the towel on the jobs picture improving any time soon," said James Cordier, analyst and president of Liberty Trading Group in Tampa, Fla.

The unemployment rate held steady at 9.5%.

Despite the losses, coffee futures remained confined to their recent trading ranges, a broker said.

Traders are reluctant to press the market too low, with supplies of top-notch arabica beans out of Central America and Colombia remaining tight, he said.

Weather conditions in top coffee grower Brazil remain mild and supportive of the ongoing harvest. Producers there are seen holding back arabica supplies in the hope that prices will resume their uptrend.

Brazil's cyclically larger 2010-11 coffee crop is expected to total 45.8 million 60-kilogram bags, Brazil's Census Bureau said Thursday. The harvest began in May and is expected to run through October.

Coffee output from Colombia rose 35% in July to 787,000 bags, owing to favorable weather, Colombia's National Federation of Coffee Growers said Thursday. Colombian production is beginning to rebound after falling 32% in 2009 compared with 2008, due to adverse weather.

Colombia is the world's largest producer of mild, washed arabica beans--the kind deliverable against ICE coffee futures.

ICE warehouse stocks fell 951 bags to total 2.075 million bags, the exchange reported.

Total open interest on ICE rose 132 to 166,272 contracts.

Volume was pegged at 30,057 contracts traded, with 3,377 calls and 2,704 put options traded.

ICE Change (cents) Range
Sep $1.6740 dn 2.45 $1.6525-$1.7135
Dec $1.6870 dn 2.35 $1.6685-$1.7245

05/08: Inches Higher; Locked In Range

Arabica coffee prices drifted higher in range-bound trade Thursday.

Nearby coffee for September delivery ended 0.10 cent, or 0.60%, higher at $1.6985 a pound on ICE Futures U.S.

Supplies of high-quality arabica coffee beans are tight, and that situation supplied technical chart patterns that attract interest from speculative traders like banks and hedge funds. Two seasons of poor coffee harvest in Central America and Colombia--locations key to premium bean production--were quickly built into prices. Now the market is in a choppy holding pattern.

"We're trapped between producer selling at $1.80 and commercial support below $1.70," said Luis Rangel, vice president for commodities derivatives at ICAP Futures in Jersey City, N.J. "In the middle we're seeing a real lack of momentum and activity."

There is uncertainty about the amount of beans from Brazil, the world's top producer, that will be considered of high enough quality to meet roaster's standards. Beans from Colombia and Central America are typically of a higher standard than Brazil's.

Brazil's 2010-11 coffee crop is expected to be 45.8 million 60-kilogram bags, the agricultural survey group of Brazil's Census Bureau, the IBGE, said Thursday. Brazil, the world's No. 1 coffee producer, has a cyclically larger crop this year compared with last year. The harvest for arabica beans, the main export coffee, started in May and should run through September.

ICE coffee open interest--the number of active positions left at the end of the session-- decreased by 42 lots Wednesday to total 166,140 lots, according to exchange data.

Volume to the point of settlement was estimated at 23,671 lots, according to exchange data. In options, approximately 3,442 calls and 2,918 put options traded.

ICE Change Range
Sept $1.6985 +0.10c $1.6910-$1.7265
Dec $1.7105 +0.20c $1.7015-$1.7370

04/08: Higher As Funds Buy

NEW YORK, Aug 04, 2010 (Dow Jones Commodities News via Comtex) -- Coffee prices rose Wednesday from recent losses as speculators continued to drive volatile trade.

Nearby coffee for September delivery 3.10 cent, or 2%, higher at $1.6975 a pound on ICE Futures U.S.

Coffee prices have rallied 23% since June. Both fundamental and technical factors are driving the market, but fund interest seems to be the main catalyst in recent choppy trade. World supplies of high-quality arabica coffee beans are tight after two years of poor harvests in Colombia and Central America.

Though a bumper crop is flowing in from Brazil, there is indecision in the market as to whether those beans will be of sufficient quality to meet market demand. Available premium arabica supplies are tight, particularly ahead of the late fall harvest in the main origins of that coffee.

In the meantime, fund traders are pushing prices.

"Funds are looking for something to happen," said Sterling Smith, market analyst at Country Hedging in St. Paul, Minn. "Perhaps a major setback in production."

September coffee is establishing a new range from $1.60 to $1.80, Smith said.

"Prices can stay in this box for a very, very long time," he said.

ICE coffee open interest--the number of active positions left at the end of the session--decreased by 2,794 lots Tuesday to total 166,182 lots, according to exchange data.

Volume was estimated at 21,436 lots, according to exchange data. In options, approximately 8,980 calls and 1,983 put options traded.

ICE Change Range
Sep $1.6975 +3.10 pts $1.6760-$1.7170
Dec $1.7085 +3.20 pts $1.6850-$1.7270

03/08: Slides As Funds Sell In Volatile Trade

NEW YORK (Dow Jones)--Coffee prices sank Tuesday as technical chart cues directed speculators to sell.

Nearby coffee for September delivery settled 5.85 cents, or 3%, lower at $1.6665 a pound on ICE Futures U.S.

Despite Tuesday's losses, arabica coffee prices have risen 22% in the last two months. The market hit a 12.5-year high Monday. A dearth of high-quality beans combined with technical chart patterns originally attracted buying. A large amount of those premium arabica beans will be unavailable until the fall harvests in Colombia and Central America. Though Brazil--the world's leading coffee producer--is currently harvesting a crop, analysts are divided on the possibility that those supplies will be able to plug the gap in premium bean supplies for a third consecutive year.

Speculative traders, like banks and hedge funds, liquidated bullish long positions, and more selling was triggered as prices fell below $1.70, said Boyd Cruel, senior softs analyst at Vision Financial Markets in Chicago. The September contract has strong support at $1.61, Cruel said.

Commercial traders that use the market to hedge trade of physical coffee are only lightly participating in the volatile market, said Marcio Bernardo, a commoditites analyst at Newedge USA in New York.

"Everything else that is driving this market is funds," Bernardo said.

Volume was estimated at 29,475 lots, according to exchange data. In options, approximately 4,018 calls and 4,440 put options traded on the floor.

ICE coffee open interest--the number of active positions left at the end of the session--decreased by 422 lots Monday to total 168,976 lots, according to exchange data.

ICE Change Range
Sep $1.6665 -5.85c $1.6515-$1.7445
Dec $1.6765 -5.65c $1.6610-$1.7520

02/08: Eases From 12.5-Year High On Profit-Taking

NEW YORK (Dow Jones)--Coffee prices stumbled back from nearly 12.5-year highs Monday on indications the rally had outpaced the underlying fundamental picture.

Nearby coffee for September delivery ended 3.80 cents, or 2%, lower at $1.7250 a pound on ICE Futures U.S. In early trading the contract hit $1.8150, the highest level for a nearby coffee contract since Feb. 6, 1998.

Coffee prices have sky-rocketted nearly 25% since June 1. Two seasons of poor coffee harvest in Central America and Colombia--locations key to premium bean production--were quickly built into prices. A noticeable decline in exchange coffee stocks pushed prices higher, which attracted interest from speculators such as banks and hedge funds.

The market's mammoth move may have overestimated physical coffee supply and demand, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago.

"The fundamentals just don't seem to justify this move up," Patton siad.

Coffee futures trading will likely continue to be a volatile affair until the market establishes a visible price range, said Spencer Patton, founder and chief investment officer at Steel Vine Investments in Chicago. The September contract has support near the $1.70--the point from which it broke higher last week, Patton said.

"Coffee just finally got into a profit-taking situation after the move we've had here," said Jack Scoville, vice president at Price Futures Group in Chicago. "Any retracement is going to look kind of ugly."

Scoville said producers in Central America have been fixing prices for the new crop, which weighs on the futures market as fresh short positions indicate more availability of beans in demand.

Brazil's arabica coffee harvest continues at a brisk pace, reaching 63% as of July 28, local agricultural consultancy Safras & Mercado said. Brazil's robusta coffee--typically used in blends--is 99% harvested as of July 28, Safras said.

ICE coffee warehouse stocks decreased by 6,426 60-kilogram bags Monday to total 2.1 million bags, according to exchange data.

ICE coffee open interest--the number of active positions left at the end of the session--decreased by 581 lots Friday to total 169,398 lots, according to exchange data.

Volume was estimated at 31,045 lots, according to exchange data. In options, approximately 6,970 calls and 6,415 put options traded on the floor.

ICE Change Range
Sep $1.7250 -3.80c $1.7205-$1.8150
Dec $1.7330 -3.50c $1.7280-$1.8155

CRB Research Team Of Commodity Research Bureau

Coffee - July 23 2010

CRB Research Team of Commodity Research Bureau - IF - Fri Jul 23, 3:08PM CDT

Coffee prices are trading sideways moderately below last month's 12-year high. Bearish factors include (1) ICO's estimate for Brazil's coffee output to rise to 50 mln bags in the year starting Oct 1, up +27% y/y, and (2) ICO's prediction that global coffee output may rise 12% to 135 mln bags next season. Bullish factors include (1) tight supplies as coffee inventories monitored by ICE have fallen -30% this year to an 8-year low, and (2) ICO's prediction that 2010 global coffee exports will drop below last year's 95.5 mln bags amid "scarcity."

Fundamental Outlook-Bull Market Correction-

Coffee prices are correcting from a recent 12-year high as the market adjusts to a possible bumper crop from Brazil. Coffee fundamentals remain bullish due to tight supplies combined with strong consumption and lagging production. Coffee production in 2009/10 fell -5.9% y/y to 120.6 mln bags (ICO), but production should rebound to 133-135 mln bags in 2010/11 (ICO). Brazil's 2010/11 (July-June) production will rise 23% y/y to 55.3 mln bags on their favorable 2-yr cycle (USDA).

Coffee Supply/Demand USDA:

2010-11 world coffee production a record 139.7 mln bags (+11% vs 2009-10's 125.7 mln bags); 2010-11 consumption 131.5 mln bags (+2.2% vs 2009/10's 128.7 mln bags); 2010-11 world ending stocks at 36.3 mln bags (+16% vs 2009-10's 31.3 mln bags); exports 103.4 mln bags (+5.2% vs 2009/10's 98.3 mln bags); 2010-11 stocks/use 27.6% (vs 2009-10's 24.3%).