Coffee Rally Stalls on Rising Supplies in Consuming Countries

By Julie Wernau Features Dow Jones Newswires

Arabica coffee futures failed to stage a rally Friday, ultimately ending lower as coffee supplies swell in consuming nations.

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Arabica coffee for September lost 1.6% to end at $1.2595 a pound after rising 0.4% to $1.286 a pound on the ICE Futures U.S. exchange. An attempt to break above the contract's most recent high of $1.2985 a pound failed.

ED&F Man's Volcafe said supplies of beans in the U.S. remain voluminous, with the latest figures from the Green Coffee Association pegging U.S. stockpiles of beans at 7.1 million bags, the highest since 1994.

"Demand is dead," said Thiago Marques Cazarini, a coffee broker with Cazarini Trading Co. in Brazil.

Other than a few big cooperatives in Brazil, the world's largest coffee growers, most exporters haven't been able to fill their books for further shipments, he said. The 2017-18 crop is being harvested in Brazil.

The U.S. Agriculture Department is forecasting total coffee production to be about four million bags lower than last year, mostly due to lower arabica output. J. Ganes Consulting said that early yields have produced smaller bean sizes because of dry weather earlier in the year combined with untimely rains. The difference in cost between arabica futures and robusta futures traded in London for the bean typically found in instant coffee is the narrowest it has been in nearly 3 1/2 years.

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The price of robusta beans has soared 6% over the last three sessions, with exporters in Vietnam, the largest robusta producer, struggling to find coffee after many farmers sold their harvests at the beginning of the year when prices reached a five-year high.

The USDA said Friday that it is raising exports out of Vietnam in the 2016/2017 season by1.5 million bags to 25.0 million, unexpectedly drawing inventories lower.

Meanwhile, arabica prices have been stable this week, leading some traders to buy arabica futures in anticipation that there could be bean-switching.

In other markets, raw sugar for July lost 0.2% to settle at 13.44 cents a pound, cocoa for September lost 2% to settle at $2,028 a ton, frozen concentrated orange juice for July lost 0.7% to settle at $1.4175 a pound and December cotton was down 0.2% to end at 69.36 cents a pound.

Write to Julie Wernau at julie.wernau@wsj.com

(END) Dow Jones Newswires

June 16, 2017 17:17 ET (21:17 GMT)