Coffee Prices Slide On El Nino

Coffee prices slid to 6-week lows on Wednesday as speculators continued to sell against a background of mild winter weather in top producer Brazil and a lack of buying interest from roasters.

"I don't think there is anyone there to step in front of this market," said Dean Witter analyst Steve Platt. "Roasters panicked and got whatever they could in April and May and are now covered."

Coffee for July delivery at the Coffee Sugar and Cocoa Exchange in New York closed 10.30 cents a pound lower at 207.65 cents, down 35 per cent from the 20-year high of 318 cents on May 29."Speculators got committed hoping there would be a freeze," Platt said.

 

Coffee stocks in consuming and producing countries remain near 20-year lows, but producer shipments that accelerated since March with soaring prices appear to have put roasters in better shape in recent weeks.

Brazil, which usually provides at least a quarter of annual world coffee supplies, exported 1.33 million bags in May, up from 1.22 million in April and nearly double the 695,815 bags it shipped in May 1996, according to a report by the Brazil Federation of Coffee Exporters on Wednesday.

Weather forecasters continued to report mild temperatures in Brazil with the onset of winter and no threat of a damaging freeze to coffee trees. Three years ago coffee prices soared when Brazil was hit with two hard frosts in June and July.

On Tuesday, the US National Oceanic and Atmospheric Administration said the most significant El Nino weather pattern since 1983 was in progress and it would likely affect world crop development.

El Nino -- a global weather pattern triggered by warmer than usual ocean temperatures in the South Pacific -- has the potential to produce drought-like conditions in southeast Asia, Australia and India that could threaten oilseed and grain crops, the grain trade newsletter Oil World said.

However, some meteorologists said the weather pattern's effect on US crops would be negligible this year. "There is not much correlation between developing El Nino at this time of year and what it does for the summer season," said forecaster Fred Gesser of Weather Express Inc in Omaha. South Pacific temperatures this year are the warmest since 1983, when an El Nino effect was cited for a searing drought in Indonesia, South Africa, Australia and the Philippines.

At the New York Mercantile Exchange, platinum group metal prices continued to rise with a date for the resumption of exports from top producer Russia still unclear.