Arabica Coffee, Cotton Hit Near-Six-Week Highs

Coffee prices jumped Monday as a weak U.S. dollar made commodities priced in the currency less expensive for foreign buyers.

Arabica coffee for May, the most actively traded contract, rose 3.8% to end at $1.462 a pound on the ICE Futures U.S. exchange, the highest close since Feb. 24.

The dollar fell in early trade, weighed by a weaker-than-expected U.S. jobs report released Friday. Coffee, sugar, cotton and cocoa are priced in dollars, so generally a weaker U.S. currency encourages buying by holders of foreign currencies while discouraging producers from selling their commodities.

Supply concerns are also energizing coffee prices, which fell last month to their lowest level in a year. The International Coffee Organization forecasts that the world’s supply of coffee will be less than demand for the coming year, and analysts said private estimates out of Brazil are also pointing to lower crops.

Brazil’s two largest coffee cooperatives are expected to release their forecasts this month. The harvest of arabica coffee, prized for its mild flavor, could begin as early as June in Brazil.

“Coffee clearly has tremendous potential to go up, it could double in value,” said Shawn Hackett, president of Hackett Financial Advisors, a brokerage and consultancy in Boynton Beach, Fla. “We could see the only time the coffee market has run out of robusta and arabica simultaneously.”

Indonesia, Vietnam and the Philippines have seen weather-related growing problems for robusta coffee, Jack Scoville, vice president at Price Futures Group in Chicago, wrote in a note Monday. Robusta is a lower-grade variety frequently used in instant coffee.

In other markets, cotton for May delivery rose 2.6% to 65.34 cents a pound, its highest since Feb. 25. The May cocoa contract end up 1.2% to $2,800 a ton, its highest since March 13.

Raw sugar for May delivery slid 1.6% to 12.54 cents a pound, after gaining 6.8% over the previous two sessions. The May contract for frozen, concentrated orange juice fell 4.1% to end at $1.1975 a pound, its biggest one-day fall since March 19.

Orange juice’s problems are bigger than the whims of the dollar, Mr. Hackett said.

“Unless something comes out that says, ‘Orange juice can save your life’ and people decide they want to drink more of it, orange juice just isn’t going to come back,” he said. U.S. retail sales of orange juice fell 6.4% in the four weeks ended March 14 from a year ago, according to Nielsen data provided by Florida’s Department of Citrus. Sales have been easing for more than a decade as U.S. shoppers have seen more variety in the beverage aisle.

Orange-juice production is also down, but the world isn’t running out of orange juice because demand for the product is falling even faster, Mr. Hackett said. The orange-juice market is likely to remain quiet until hurricane season, he said, which starts June 1.

Suorce: Dow Jones Newswires