NEW YORK — Coffee fell to its lowest point in more than four years as dry weather helps improve growing conditions in Brazil, the world's largest producer and exporter.
Most of Brazil's growing areas will get sun this week, as alternating periods of rain and dry weather allow farmers to work in fields and spur crops that will be collected next season to flower multiple times, Marcio Custodio, a forecasting director at Sao Paulo-based Somar Meteorologia, said Monday in a telephone interview. The beneficial conditions will boost output, he said.
Global production is set to exceed demand for a fourth straight season, pushing inventories to a five-year high, according to the U.S. Department of Agriculture. The glut is helping to cut costs for Starbucks and Kraft Foods as coffee futures tumbled 22 percent in 2013, the third-largest drop among the 24 commodities tracked by the Standard & Poor's GSCI Spot Index.
"Brazil's going to have another good crop, and they have quite a bit of carryover from last year," Rodrigo Costa, a trading director at Caturra Coffee Corp., a dealer in Elmsford, N.Y., said in a telephone interview. "There are also promising harvests in Indonesia and Colombia. The trend is lower for prices."
Arabica coffee for delivery in December fell 1.7 percent to settle at $1.127 a pound at 2 p.m. Monday on ICE Futures U.S. in New York, after touching $1.123, the lowest since March 18, 2009.
Futures are heading for a third straight annual decline, the longest slump since 1993. The "recent favorable weather conditions" prompted Goldman Sachs Group Inc. to lower its price outlook by 7.7 percent, analysts said in an Oct. 18 report. The commodity will be at $1.20 in three, six and 12 months, down from a previous forecast of $1.30, the bank said.
Global coffee production, including the robusta variety that accounts for 41 percent of supply, will exceed demand by 4.46 million bags in the 2013-2014 season, from a 10 million-bag surplus a year earlier, according to the USDA. Inventories will reach a five-year high of 30.53 million bags, the USDA predicts.
Arabica is used in specialty coffees sold by Starbucks and other shops, while robusta is used in instant coffee. Cheaper beans prompted J.M. Smucker Co. to cut prices in February for Folgers, the top-selling U.S. brand. Kraft said May 3 it would cut the price of 12-ounce bags of Gevalia coffee by 6 percent.