Coffee Prices on Track for One-Year Low

By Julie Wernau Features Dow Jones Newswires

Coffee prices fell to a one-year low Tuesday as a record number of short-positioned traders pushed the contract lower.

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Arabica coffee for September lost 2.5% to $1.2345 a pound on the ICE Futures U.S. exchange, on track to end at its lowest level since June 2, 2016.

As of last Tuesday, speculators in the coffee market betting on lower prices outweighed bullish bets by 33,433 contracts. The contract has dropped 17% so far this year, leading coffee roasters to buy and hold coffee beans because they are able to benefit more from their positions in the market than from the coffee.

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.

It is also created a situation in which producers in Brazil and Colombia, are on the sidelines.

"Where the price is currently, it isn't advantageous for these producing nations to hedge their crops so you're not seeing them chasing this crop lower. They're patient at this point," said Nicholas Scaduto, a trader at Armenia Coffee Corp. in New York.

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Meanwhile, the stark contrast between a precipitous drop in arabica coffee prices and a sharp rise in prices for the London-traded robusta coffee bean, typically used in instant coffee, has been leading some roasters to consider bean switching in their blends, traders said.

Usually the arbitrage between the two is between 40 and 60 cents per pound and recently it has dropped as low as 27 cents a pound.

In other markets, raw sugar for October was flat at 13.66 cents a pound, cocoa for September dropped 0.6% to $1,922 a ton, frozen concentrated orange juice for July lost 0.3% at $1.3855 a pound and December cotton was off 0.5% at 68.73 cents a pound.

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

(END) Dow Jones Newswires

June 20, 2017 11:35 ET (15:35 GMT)