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Rain fears send coffee prices to multi-year highs

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Coffee prices jumped above $2 a pound in New York for the first time in 13 year, and hit a two-year top in London, as rainfall in Colombia and Vietnam raised concerns over a further squeeze on supplies.

Arabica coffee beans for December delivery hit 203.50 cents a pound in New York, the highest for a benchmark contract since 1997, as rains continued to beset Colombia, the second-biggest producer.

While it is a sensitive period for Brazil, the main producer too, with its coffee trees in flower, "the short-term focus is on the smaller-than-expected production out of Colombia", Terry Roggensack at Hightower Report said.

"Concern that heavy rains in production areas of Vietnam and Colombia could have a negative impact on upcoming crops remains the main supportive factor for the market."

Colombia's farm minister, Juan Camilo Restrepo, said last week that the country's 2011 production could fall below this year's 9.5m-bag crop, itself a modest harvest, saying that "the surplus of rain affected flowering".

New York prices are also being underpinned by a shortage of stocks delivered to the exchange, with inventories at 1.84m bags, near a 10-year low.

Typhoon trouble

Meanwhile, fears over damage from Typhoon Megi, which is heading to China after causing at least 27 deaths in the Philippines, have added to concerns over crops in Vietnam, the biggest grower of the robusta coffee beans traded in London.

Supplies from Vietnam are already suffering a seasonal squeeze, ahead of the start of the main harvest period, with some reports that shippers are reluctant to export while awaiting details of a stockpiling scheme, which could further inflate prices.

Export firms in Vietnam are still waiting for government approval to start a coffee stockpiling plan which would pull coffee off of the market for six months.

Robusta coffee beans for November hit $1,899 a tonne, their highest since October 2008, before easing to close at $1,872 a tonne, up 2.8% on the day.

Arabica beans had edged back to finish at 201.00 cents a pound, up 2.2% on Wednesday's close.

By Agrimoney.com

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