Arabica coffee prices staged some recovery on Thursday, but
only after sinking to a fresh four-year low, undermined by expectations of a "supersafra"
harvest in Brazil, and a revival in Colombian output too.
Arabica coffee for December stood 0.5% higher at 111.10
cents a pound in early deals in New York, looking for its first rise in eight
sessions, but only after hitting 110.40 cents a pound, the lowest for a spot
contract since March 2009.
The weakness in values reflects continued expectations of a
potential record crop in Brazil in 2014, the top producer, where the term "supersafra"
, superharvest, is being used, with ideas that output could reach 60m bags for
the first time.
That would represent a rise of 6m bags on the 2013 crop
which, at 54m tonnes, was a record for an "off" year in Brazil's cycle of
higher and lower production years.
Ideas for Colombia's 2013-14 production have also improved,
as rust-resistant trees replanted after an outbreak of the devastating fungus, come
And arabica values are also being dragged lower by those of
robusta coffee beans, which themselves set a three-year low in London on
Wednesday, depressed by a bumper harvest in Vietnam, the top producer of the
'We remain bearish'
"The outlook for the next Brazilian crop appears optimistic
as the favourable crop weather in Brazil boosted flowering of the crop," Joyce
Liu, at broker Phillip Futures, said.
"With a surplus of supplies and expectations of a good crop
in Brazil, we remain bearish on arabica coffee."
Commerzbank said: "Favourable weather conditions mean that
next year once again expects to see a very good crop in Brazil.
"What is more, the coffee harvest is currently underway in
Vietnam, which has caused the robusta price to fall to a three-year low and is
likewise weighing on the arabica price."
The bank highlighted that the fall in arabica prices had come
despite a recovery in Brazil's real, which has rebounded some 10% against the
dollar from multi-year lows reached in August.
That might have been expected to have provoked a rise, in
dollar terms, of assets such as arabica coffee in which Brazil is a major
As a further pressure on values, investors are aware that
Brazilian growers have slowed sales of beans, thanks to the low prices and a government
support programme, with only 37% of the 2013 crop sold as of the end of last
month, compared with a typical 47%, according to the Confederação da
Agricultura e Pecuária do Brasil (CNA).
Indeed, Cepea, the research unit attached to the University
of Sal Paulo, reported last week that "Brazilian exporters report difficulties
to build stocks, given that producers are refrained regarding sales, expecting
more remunerative quotes".
Slow sales imply extra selling pressure ahead.
However, some commentators are cautioning that the extent of
the arabica price decline could, in discouraging growers to fork out for
fertilizers and pesticides, see the 2014 harvest fall short of expectations.
The Brazilian coffee price of R$257.54 a bag as of a week
ago compared with production costs which in most regions top R$350 a bag,
according to the CNA.
Procafe has warned that low fertilizer applications will
exacerbate a problem caused by heavy rains that "washed" nutrients from the
The moisture has also created conditions which would
encourage the spread of rust, posing a threat given the prospect of low