World Coffee Prices Resume Surge

Coffee prices closed sharply higher on Monday as weather forecasts calling for another chilly night in top producer Brazil triggered a wave of buying by speculators.

"The weather did it, although no one is predicting a freeze," said PaineWebber analyst Bernard Savaiko.

At the Coffee Sugar and Cocoa Exchange in New York, coffee for July delivery surged 16.05 cents a pound -- or nearly seven percent -- to close at 253.30 cents. That compares to the 20-year high of 318 cents a pound set late last month.

Coffee prices have risen from less than $1 a pound in December as market players watched coffee roasters scramble for dwindling supplies and absorb reports of smaller South American crops this year.

 

With stockpiles at 20-year lows, any chance of a damaging freeze in Brazil as that country enters its winter season this month could send prices up again, traders said. Such a freeze in June and July 1994 sent world prices soaring. Although Brazil's coffee regions escaped damaging cold this past weekend, traders said reports of frost in low-lying areas where no coffee is grown were enough to rattle nerves.

Brazilian forecasters anticipate cold temperatures again in the region early Tuesday morning and a repeat of frosts in the lower regions where coffee is not grown. But forecaster Jon Davis at brokerage Smith Barney downplayed the danger.

"In fact, during the next week there is no indication of any significant cold airmasses moving up into Brazil from Argentina," Davis said in his daily weather update.

In the grain markets, weather forecasts showing temperatures in the Midwest climbing back to normal levels helped prompt a sharp fall in soybean futures at the Chicago Board of Trade. A large buildup of "short" or selling positions by commercial grain firms added pressure.

Soybeans for July delivery closed down 24-1/2 cents a bushel at $8.11, with many speculators exiting the market.

"The selloff today was technical, but weather also had something to do with it," said Joel Karlin, analyst with Everen Securities. "We're supposed to get warmer temperatures."

In a widely watched biweekly report issued late on Friday, the Commodity Futures Trading Commission also reported a net buildup of nearly 30 million bushels in short soybean positions, or contracts to sell, by grain companies in the week ended June 3, a key sell indicator for many professional traders.

Wheat prices ended higher as rains delayed wheat harvesting in Texas and Oklahoma and talk circulated that rain this spring in the Ohio River Valley could cause disease problems.

Wheat for July delivery closed at $3.67-1/2 a bushel, up 8 cents.

Gold prices ended firm, with August gold at the Comex ending up 60 cents at $346.30 an ounce.

Possible delay to the introduction of European Monetary Union following the victory of the Socialists in France's elections last week may lessen the need for European central banks to sell gold, analysts said.

Recent strength in platinum and palladium markets due to tight supplies and Russia's export ban in December was also supportive, as was the lower US dollar, analysts said.

July platinum at the New York Mercantile Exchange ended down $3.80 an ounce at $451.10, after seeing a new contract high last week at $473.40, when spot platinum prices in the physical market saw a seven-year high at $500.

If Russian supplies were delayed for another month, platinum prices could reach $600 an ounce and palladium $300 an ounce, said Derek Engelbrecht, global marketing manager South Africa's Impala Platinum.

Nymex September palladium ended off $4.10 at $174.90.

Oil prices closed lower as traders said the market took a breather on Monday after a 10 percent decline last week which brought crude futures prices to their lowest level in 15 months.

Gasoline for July delivery at the Nymex ended down 0.93 cent a gallon at 56.20 cents, with July crude oil down 11 cents a barrel at $18.68 and July heating oil down 0.02 cent a gallon at 51.50 cents.