Coffee prices climbed to a two-year high on Monday as dry weather in Brazil raised the prospect of a global deficit in 2014/15 and potentially the following season as well.
The cost of arabica beans has surged around 80 percent since the start of the year, boosted by concerns that dry weather in top grower Brazil would cut the size of the 2014/15 crop and could also curtail production in 2015/16.
A Reuters poll published on Friday indicated the dry weather had cut forecasts for Brazil's coffee crop in 2014/15 by more than 10 percent, with a median result of 48.9 million (60-kg) bags.
"Brazil needs to be producing a minimum 50 million bags, just for the world arabica market to be pretty much in balance," said Andrea Thompson, an analyst with CoffeeNetwork, part of INTL FC Stone, in a market note.
May arabica futures on ICE were 5.50 cents, or 2.8 percent, higher at $2.0235 per lb as of 1418 GMT after earlier peaking at $2.0480, its highest level since March 2012.
Analysts said the dry weather should also reduce the size of the 2015/16 crop, which had already been expected to be lower as it will be an "off-year" in Brazil's biennial crop cycle.
"An arabica deficit in 2014/15, compounded by the unquestionable knock-on impact on the 2015/16 season, given it is an 'off' and therefore potential deficit season anyway, would be fuel enough to increase the chances of the 300 cents/lb level," Thompson said.
Arabica coffee prices climbed above $3.00 per lb during the market's last major rally in early 2011.
However, dealers said there was still a lot of uncertainty about the level of this year's crop in Brazil with the weather pattern this season unprecedented in recent history.
"There is a very wide range (of crop forecasts) at the moment and nobody really knows what the outcome will be," Commerzbank analyst Michaela Kuhl said.
Kuhl said the market's current mood was "something quite close to panic."
"It is very difficult to forecast when this (rally) will end but we think prices of $2.00 per lb are overdone in the current situation," she added.
Prices for robusta, which is mainly used for instant or soluble coffee, has failed to keep pace with arabicas during the recent rally but still climbed to a one-year high on Monday.
Brazil is the top producer of arabica coffee and Vietnam is the most important robusta grower.
May Liffe robusta coffee was up $45, or 2.1 percent, at $2,144 per tonne, a one-year peak.
Sugar prices were slightly lower with supplies remaining ample despite some reduction in the expected size of the crop in Brazil, which is also the top producer of the sweetener.
"It has been several years now with huge surpluses so there is no scarcity even if there is an end coming to these sugar surpluses in the next season," Kuhl of Commerzbank said.
May raw sugar futures on ICE were off 0.06 cent, or 0.3 percent, at 17.95 cents a lb.
"While further downside pressure is possible in the very near term (owing to a strong northern hemisphere crush), weakening global production economics and increasing competition from Brazilian ethanol production should present increasing resistance to lower prices," Morgan Stanley said in a report.
May white sugar futures on Liffe rose a marginal $0.50 or 0.1 percent to $475.90 per tonne.
Cocoa futures edged higher with the market underpinned by an expected global deficit in the 2013/14 season.
ICE May cocoa futures were up $11 or 0.4 percent, at $2,992 per tonne as the market moved closer to a 2-1/2-year high of $3,002 set last month.
Dealers said there remained some concern about prospects for the mid-crop in top grower Ivory Coast despite some rains as the country moves out of its dry season.
Patchy rain and hot temperatures across most of Ivory Coast's cocoa-growing regions last week aided the development of the mid-crop but fears persisted of a poor, late harvest in some areas, farmers and analysts said on Monday.
May cocoa futures on Liffe rose 5 pounds, or 0.3 percent, to 1,861 pounds a tonne.