Volatile Coffee Climbs to Defy Slump in Equities, Commodites

(Bloomberg) -- Coffee futures in New York rose. That’s not a misprint.

Amid crashing equities and commodities, arabica coffee, the most-volatile raw material this year, posted a rally on a shortfall of high-grade beans favored by Starbucks Corp.

Arabica for May delivery rose 1.7% to close at $1.092 a pound on ICE Futures U.S. in New York. At one point, the price jumped as much as 3.3%. In the previous three sessions, the commodity plunged 12%, the most since October 2008.

“With the very tight supply situation for mild arabicas in Central America, coffee should not go down,” Rodrigo Costa, the U.S.-based coffee director at Comexim, said in a telephone interview. Even in Brazil, the world’s top producer and exporter, “there’s no availability,” he said.

As prices jumped in the previous quarter, Brazil almost “sold out” of the 2019-20 crop that was smaller than expected, Costa said.

Differentials for Colombian and Central American beans remain elevated in the cash market, and relief won’t come until the third quarter with Brazil’s new crop.

“If markets calm down,” there’s a chance arabica may climb as high as $1.50, Costa said.

“In Brazil, what’s affecting the differentials is the lack of coffee,” Renata Eller Santos of Eller Coffee Trading in Varginha, Brazil, said in an interview at the National Coffee Association convention in Austin, Texas. “Last year’s harvest was not only smaller but was also of lower quality.”

While the nation is set to reap a bumper crop in 2020, “it’s all going to depend on the quality,” she said. “Producers are doing well. The ones that held back and still have coffee will now hoard for longer, so until the start of the new harvest, it will be tight.”

To contact the reporters on this story: Marvin G. Perez in New York at mperez71@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Patrick McKiernan

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