Coffee Falls as Supplies Gain, Demand by Hedge Funds Dwindles

Date: Thursday, November 20, 2008
Author: Ron Day, Bloomberg.com

Coffee dropped the third straight day in New York on higher bean output by the world's biggest producers and signs that commodity investments by hedge funds are dwindling.

Coffee supplies in warehouses monitored by ICE Futures U.S. have increased 1.8 percent this year to 4.55 million bags. A bag weighs 60 kilograms (132 pounds). Commodity exchange-traded products had their worst-ever month in October with outflows totaling $2 billion, Barclays Capital said on Nov. 7.

``There's more coffee coming out of Colombia, Brazil has a large crop, and Vietnam is looking at a bumper crop,'' said Julio Sera, a trader at Hencorp Futures in Miami. ``This year has been governed by the hedge-fund world, and I don't think it's going to be as exacerbated as it has been.''

Arabica coffee futures for March delivery fell 0.55 cent, or 0.5 percent, to $1.1405 a pound on ICE in New York. The price has dropped 1.2 percent this week and is down 16 percent this year.

The Reuters/Jefferies CRB Index of 19 raw materials, including coffee, touched the lowest since September 2003 today.

Brazil's is the world's biggest coffee producer, followed by Vietnam.

To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.