Barclays joined commentators forecasting a rise in arabica
coffee prices, forecasting a weaker Brazilian harvest next year, as producers renewed
an attack on "absurd" ideas of a stronger crop.
Barclays, which had foreseen weakness in New York arabica
futures, which last month fell below 140 cents a pound for the first time since
2010 on a front contract basis, said that "there is potential for a rebound in
The bank forecast a slightly lower world coffee harvest in 2012-13,
of 144m bags, a rise of 6.4%, rather than the 8.4% increase to 146m tonnes
expected by the International Coffee Organization.
It estimated the harvest in Colombia, the second-ranked arabica
producer after Brazil, at 8.8m bags, up from the 7.7m bags in 2011-12, but well
below the long-term average of 11m bags.
'Vulnerable to short-covering
However, it also flagged as a supports to arabica futures
the potential for a rash of position covering by hedge funds, which have built
up a historically large net short position in New York futures and options,
pegged by regulators at 26,137 lots as of December 18.
The data "show that a large speculative short position has
built up, the most bearish since November 2003, and has left the market
vulnerable to a short-covering rally".
Furthermore, it forecast a fall in Brazilian output in 2013,
an "off" year in the country's cycle of alternate higher and lower producing
years, if a relatively small decline, of 5.9% compared with the typical 15-20%
"We expect Brazil's 2013-14 'off-year' crop to experience a
smaller downturn than previous off-years as weather has been favourable for
flowering coffee trees," Barclays analyst Kate Tang said.
"We expect coffee prices to be supported by an off-year crop
Talks on options
The comments come amid a dispute on prospects for Brazil's
2013 coffee harvest which has prompted an industry debate on coffee data, and
the potential for market manipulation.
The Brazil-based Conselho Nacional do Café (CNC) producers'
group, restated as "absurd" ideas of a rise in production in 2013 as floated by
commentators such as exporter Terra Forte, which has pegged the harvest at 53.4m
bags, thanks to the good flowering conditions.
Official crop bureau Conab has pegged this year's harvest at
The CNC said that it was working with government and
exchange officials on the promotion of options as a tool for producer selling,
a move which would offer "less space for speculation".