Arabica coffee futures soared to their highest level in more than 2⅟2-years at the start of the week as the market focused on concerns that forecasts of prolonged dry weather in Brazil’s key central and southern coffee-growing areas will cause severe damage to the country’s 2015-2016 (April 1-March 31) coffee crop, particularly of arabica beans.
December arabica on New York’s ICE Futures U.S. exchange climbed to $2.2550 a pound on Oct. 6, the strongest level for a front-month contract since January 2012. The contract subsequently lost ground on profit-taking to settle at $2.2080 a pound, some 14.3 cents up on the day.
ICE arabica coffee futures’ first surge above $2 a pound in two years came in early March as worries about damage to the 2014-2015 crop intensified following the worst drought conditions in decades to hit Brazil’s key coffee-growing regions in the centre and south of the country early this year.
Brazil’s National Coffee Council, which represents the country’s coffee cooperatives, recently estimated that the nation could see less than 40 million 60-kg bags of coffee in 2015-2016. The council estimated that output in 2014-2015 following the harvest just finished may be down as much as 18 percent to 40 million bags, the smallest in three years.
Conab, Brazil’s agricultural agency, had forecast the country’s 2014-2015 coffee output at between 46.5 million bags and 50.2 million bags before the drought, compared with an output of 49.2 million bags in 2013-2014.
Leading soft commodities analyst F.O. Licht in late September forecast Brazil’s 2014-2015 coffee output at 43 million bags. Analysts said the market is now waiting for new estimates of the size of the 2015-2016 crop, where harvesting begins next May.
Despite the output concerns, ICE December arabica coffee finished lower at midweek, settling at $214.45 a pound, 1.90 cents down on the day, after touching an intraday high of $2.214.
November robusta coffee on London’s NYSE Liffe exchange also rose, settling at $2,176 a tonne on Oct. 7, $96 up on last week’s close at $2,080 a tonne. Robusta coffee had shed some of these gains at midweek, settling at $2,151 a tonne on Oct.8.
Cocoa futures on the ICE Futures U.S. exchange fell to their lowest since late May amid signs of weakening consumption of the key chocolate-making ingredient and the prospect of bumper supplies from top grower Côte d’Ivoire.
ICE cocoa for December delivery settled at $3,040.50 a tonne on Oct. 8 after dropping to $3,030 earlier in the day, marking the front-month’s lowest point since late May.
The ICE December contract reached a 3½-year high of $3,399 a tonne on Sept. 25 amid fears that the Ebola virus would spread to Côte d’Ivoire and Ghana and reduce output in those countries. To date, the two countries, which typically produce around 60 percent of the world’s cocoa, have had no confirmed cases of the disease.
But Côte d’Ivoire shares a border with Liberia and Guinea, two of the three West African countries to be hardest hit with Ebola. Ghana is Côte d’Ivoire’s eastern neighbour. Fears are that an outbreak of the disease in either country would restrict the movement of cocoa to the coast for export.
Prices for cocoa for March delivery on Liffe are also lower, with the December contract settling at £2,008 a tonne at midweek. In late September, the Liffe December contract had climbed as high as £2,187 on the worries about Ebola spreading to Côte d’Ivoire and Ghana.
But cocoa futures in New York and London have been falling back on news that the two West African countries are to increase price supports for their cocoa farmers, which would likely increase supply.
Côte d’Ivoire currently expects its 2014-2015 (Oct. 1-Sept.30) cocoa beans production to fall by around 8 percent from the previous year’s record crop of 1.74 million tonnes due to damage by swollen shoot disease, according to a Reuters report, quoting an unnamed official of the country’s Coffee and Cocoa Council. However, the country still expects to produce around 1.6 million tonnes in the current season, the official said.
Also weighing on prices is the expectation that European and Asian third quarter cocoa-grind data, which is seen as a measure of demand, will be weaker. The data is scheduled for release in the coming couple of weeks.
Raw sugar futures rose to two-month highs this week, boosted by expectations of lower supplies from top producer and exporter, Brazil. March raw sugar on ICE Futures U.S. first climbed to 17.12 cents a pound before easing back to settle at 17.03 cents on Oct.7, and to fresh two-month peaks on Oct. 9.
Speculative covering lifted ICE raw sugar to 17.20 cents a pound following the release of data on Oct. 9 from Brazil’s sugarcane industry association, Unica, which showed Brazilian mills crushed less cane in the second half of September than had been expected due to rain. The country’s mills crushed 28.8 million tonnes of cane in the period, against the 30 million tonnes that had been expected.
Brent crude falls below $90, WTI at 17-month low
Crude oil prices continued to decline amid ongoing worries about slowing demand and ample supplies. Brent crude for November delivery on London’s ICE Futures exchange dropped below $90 a barrel for the first time in a year on Oct. 9. Brent fell as low as $89.16 a barrel before trimming some of the losses. The contract settled the previous day’s trade at $91.38, it weakest close since late June 2012.
West Texas Intermediate, the U.S. crude benchmark, for November finished at $87.31 a barrel on Oct.8, having earlier dipped to $86.83. The Oct.8 settlement marked the lowest settlement since April 17, 2013.
Rising U.S. production amid the country’s shale drilling boom and higher output from the Organization of Petroleum Exporting Countries (OPEC) at a time of weakening global demand is weighing heavily on oil prices, analysts say.
As reported last week, supply from OPEC, which contributes around 40 percent of the world’s crude supply, in September averaged 30.96 million barrels per day, up from 30.15 million barrels in August, according to a Reuters’ survey based on shipping data and information from sources at oil companies, OPEC and consultants. The September output was OPEC’s highest since November 2012 when it supplied 31.06 million barrels.
OPEC’s next meeting is on Nov. 27 in Vienna, where the falling oil prices are expected to trigger a debate on whether output needs to be cut. State-run Saudi Aramco reduced it selling prices to Asian customers on Oct. 1, a clear sign according to analysts that the world’s largest exporter is willing to let prices fall in order to maintain crude market share.
U.S. crude oil production in September was running at its highest level since July 1986, averaging an estimated 8.7 million barrels per day, according to the U.S. Energy Information Administration (EIA) data.
The EIA on Oct. 8 reported the country’s crude oil inventories climbed by 5 million barrels for the week ending Oct. 3 to reach 361.7 million barrels. Gasoline stocks also rose, up by 1.18 million barrels while distillate fuel stocks increased by 439,000 barrels last week, the energy department’s weekly oil status report showed. The market had been expecting gasoline and distillate fuel inventories to have declined.
Because of rising world oil production and falling consumption, the EIA has lowered its 2014 and 2015 price forecasts. WTI is projected to average $94.58 a barrel in 2015, down from a September forecast of $94.67. The Brent crude price outlook, meanwhile, is cut to $101.67 a barrel from $103 last month.
Turning to precious metals, gold fell below $1,200 an ounce for the first time this year on Oct. 3 as the U.S. dollar climbed still higher on the back of better-than expected U.S. non-farm payroll data. The more positive economic data and the consequent prospect that interest rates would be hiked sooner-rather-than later dimmed the appeal of safe-haven investments of assets like gold.
Spot prices on the London bullion market dropped as low as $$1,191 an ounce on Oct.3 and to $1,185 on Oct. 6, marking the precious metal’s weakest level since December 2013. U.S. gold futures on Comex for December settlement also closed at their lowest since last December on Oct. 3 at $1,192.90 an ounce.
However, gold prices were boosted at midweek as the U.S. dollar’s appreciation against the Euro faltered after the minutes of the last Federal Reserve Open Committee meeting held Sept. 16-17 were published, showing the Fed was wary of raising interest rates too soon.
Gold prices had touched their highest level in two weeks in London on Oct. 9 at the time of writing, edging up to as high as $1,233.70 an ounce.
Platinum and palladium were also higher at midweek as investors took advantage of the depressed prices to buy. Platinum futures prices on Comex fell to their lowest since August 2009 earlier this week, with the most-actively traded contract – for January – settling at $1,249.20 a troy ounce on Oct. 6. Palladium fell to $766.10 a troy ounce, the lowest since late March. Both pgms have come under pressure on worries that slowing growth in Europe and China could reduce demand for vehicles. The two metals are used in auto-catalyst converters .
January platinum futures on Comex settled at $1,266.90 a troy ounce on Oct. 8, up more than$40 up on where it ended last week. Palladium finished $41.90 up on last week’s close, settling at $796.45 an ounce.
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