By Claudia Carpenter –
Coffee prices in New York surged 13 percent to a four-year high after a report of an earthquake in Colombia, the world’s third-largest grower.
A 6.7-magnitude earthquake struck the west coast of Colombia, destroying about 19 homes in the port city of Buenaventura, 220 miles west of Bogota, the Associated Press said.
Coffee prices have soared 28 percent this month amid reduced supply from Brazil, which is the world’s biggest coffee grower.
”News of the earthquake just added to the bullishness of the market,” said Michael McDougall, a trader at Fimat USA Inc. in New York. Any damage to roads or the ports in Colombia may limit shipments from the country, McDougall said.
Coffee futures for March delivery rose 10.75 cents to 94.55 cents a pound on the New York Board of Trade, the highest closing price and biggest gain since July 2000. A futures contract is an obligation to buy or sell a commodity at a set price by a specific date.
The rally accelerated as the March contract rose above 89.2 cents, the previous high on Sept. 27, triggering buying by traders who follow charts, McDougall said. Hedge funds and other large speculators ”are just too big for this market,” he said.
Colombia was expected to boost production to 11.6 million bags of coffee in the crop year starting in October, with 10.39 million bags exported, the U.S. Department of Agriculture said in a June report. It would be the first increase in output for Colombia after two straight years of declines. Each bag is filled with 132 pounds of beans.
Exports from Brazil are lagging expectations as some growers hold back supplies because prices are too low, the department’s Foreign Agricultural Service said in a report last week.
The rally in coffee prices is ”a reassessment of global supply and demand,” said Jonathan Parkman, an analyst at Credit Lyonnais Rouse Ltd. in London.
Source: Miami Herald