Coffee Drops Lower, Erasing August Gains

By Julie Wernau Features Dow Jones Newswires

Coffee prices were on track to end lower for the second session in a row, helped along by a boost to production estimates by the International Coffee Organization.

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Arabica coffee for December fell 1% to $1.3075 a pound on the ICE Futures U.S. exchange.

The contract has given up much of its gains from the first two weeks of the month, and has been the worst performing commodity this week.

The arabica coffee market has been in standby mode, with high global stockpiles of coffee keeping consuming nations satisfied for now and low coffee prices leaving producers with little reason to sell.

The International Coffee Organization said this week that it expects record global coffee production of 153.9 million bags in 2016/2017, boosting its estimate by 2.3 million bags. Traders have been watching the weather in Brazil, the world's largest producing country, for hints at production for the 2018/2019 harvest but it is still early in the season. Some trees are flowering.

Meanwhile, according to the Green Coffee Association, stockpiles of coffee in warehouses reached 7.4 million bags at the end of July, the largest since 1994, according to ED&F Man's Volcafe, enough to satisfy America's coffee needs for 100 days.

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"In general the collapse of the terminal markets has shut the door for much of the physical business, compounded by the slow summer pace; producers and consumers all seem to be in standby mode," Commerzbank said in a note.

Sucden Financial told clients that in five years of history when prices meet resistance at $1.47 a pound, it has prompted a sell off back to $1.20 a pound but that alternatively, if the market can rise above $1.35 a pound, prices have a chance to re-test $1.40 a pound.

In other markets, raw sugar for October was down 0.2% at 13.26 cents a pound, cocoa for December lost 0.2% at $1,866 a ton, frozen concentrated orange juice for September slumped 0.8% to $1.429 a pound and December cotton fell 0.3% to 66.69 cents a pound.

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

(END) Dow Jones Newswires

August 18, 2017 11:28 ET (15:28 GMT)