960423

Coffee prices soar

on falling stocks

LONDON: Robusta coffee futures surged above $2,000 a tonne to their highest levels in three months on Tuesday on jitters over falling stocks -- now around their lowest in 15-years -- and Brazil's approaching frost season.

"Pre-frost covering is the most popular explenation for the jump in prices...as is the draw in coffee stocks," said Lawrence Eagles, analyst at brokers GNI.

Brazil, the world's key grower, was hit by frosts and drought in 1994 which destroyed around half its 1995-96 crop and sent prices soaring to near 10-year highs of $4,140 in London.

World markets now are nervous over tight consumer stocks of green coffee, down at some eight million bags, and prices could soar beyond the 1994 peak if frost hits Brazil again.

"If we had a serious frost in Brazil...prices could top 1994 highs," said Eagles. He cited as a possible target in such circumstances a price for New York Arabica type coffee futures at $4 a pound.

That compares with $1.30 at the close on Monday following a speculative rally that took the market up by 10 percent, driven by roaster (processor) and trade buying.

London Robusta futures took over the lead on Tuesday and soon advanced by $177 to a 12-week high of $2,035 a tonne.

Turnover in London reached over 8,000 lots.

Traders said dwindling consumer stocks of green coffee were highlighted on Monday by a sharp drop in US certified stocks, a benchmark of consumption. US certified stocks were down by 22,336 60-kg bags to 97,984 bags in the week to April 19.

Consumer stocks of coffee have fallen after the 1994 frosts in Brazil and because of measures by the Association of Coffee Producing Countries (ACPC), representing some 75 percent of world output, to curb exports in the 12-months to June 1996.

An ACPC ceiling set at 60.4 million bags was designed to create a 10 million bag deficit to be filled from stocks.

"We have the control of the market...we have succeeded because stocks in consuming countries are around 7.5 million bags...When we started it was at 22 million," ACPC secretary general Roberio Oliviera said on Monday.

Coffee has now joined the grains and oil markets, where stocks are also tight, in a reignited 1996 commodity rally.

"All commodity markets appear to be getting very tight in terms of stocks...You have a number of markets that are inverted and reflect the low stocks held by consumers. This usually means explosive short-term moves," said Richard Grace, director of commodity fund R.Grace and Co Ltd.

The late Monday surge on New York Arabica coffee futures helped vigorous rallies by grains and petroleum to lift the Knight Ridder-Commodity Research Bureau commodities index to a new eight-year peak at 261.96 points.-Reuter