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Coffee Falls in New York as Dollar Climbs

By Shruti Date Singh

May 27 (Bloomberg) -- Coffee prices fell from the highest in eight months as the dollar rose and equities declined, reducing the appeal of some commodities. Orange juice gained.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, rose as much as 0.6 percent. The 30-stock Dow Jones Industrial Average fell as much as 2 percent. Coffee advanced as much as 1 percent earlier as the outlook weakened for arabica bean supplies from Colombia and Central America.

“When stocks collapsed and the dollar turned higher, that seemed to be the kiss of death for the coffee market,” said Jack Scoville, a Price Futures Group vice president in Chicago.

Arabica-coffee futures for July delivery fell 0.95 cent, or 0.7 percent, to $1.355 a pound on ICE Futures U.S. in New York. The price earlier reached $1.378, the highest for a most-active contract since Sept. 25.

“It’s a correction, but the uptrend is still in place, driven by fundamentals,” said Roland W. Veit, the chairman of Paragon Coffee Trading Co. in White Plains, New York. “It’s a classic behavior of a bull market. It’s zigzagging its way higher. We are going to see new highs soon.”

Colombia’s crop this year may fall to 11 million bags, the smallest since 2001, and shipments probably won’t surpass 10 million bags, down from 11.1 million last year, the National Association of Colombian Coffee Exporters said yesterday. The drop “jump-started a search for the next-best available supplies,” research firm F.O. Licht said last week in a report.

‘Bullish Uptrend’

“We are in a bit of a bullish uptrend that goes back to lack of availability of good, mild coffee,” said Raymond Keane, a trader for coffee importer Balzac Bros. & Co. in Charleston, South Carolina. “There is no relief until the new crop comes” from Colombia and Central America, he said.

Supplies from Brazil haven’t made up for the decline from other Latin American countries, Keane said. Inventories in warehouses monitored by ICE on May 22 fell to the lowest since February 2007.

Brazil is the biggest producer of coffee regardless of variety, followed by Vietnam and Colombia.

On May 22, Colombian coffee cost 87.52 cents a pound more than the most-active ICE contract, the biggest premium since at least October 2001.

Arabica beans are grown mainly in Latin America and used by specialty coffee companies including Starbucks Corp. Robusta beans, traded in London, are used in instant coffee and grown mostly in Asia and parts of Africa.

Robusta for July delivery climbed $23, or 1.5 percent, to $1,533 a metric ton on London’s Liffe exchange.

Orange Juice Climbs

In another ICE market, orange juice futures for July delivery rose 1.65 cents, or 1.8 percent, to 94.15 cents a pound.

The price has gained 39 percent this year, partly on speculation that Florida’s production will decline.

The state, the largest grower after Brazil, will produce 157.6 million boxes of oranges in the harvest that ends in June, the U.S. Department of Agriculture said on May 12. The agency projected 165 million boxes in December. Florida growers collected 170.2 million last season. A box weighs 90 pounds (41 kilograms).