Coffee advances in New York on speculation prices fell too far

May 24 (Bloomberg) -- Coffee climbed in New York on speculation prices fell too far after reaching a 21-month low yesterday. Sugar advanced.

Arabica beans fell as much as 5.4 percent to $1.651 a pound yesterday, the lowest since July 2008, on concerns Europe’s debt crisis is eroding demand prospects amid ample supplies expected next season. Global coffee output will exceed demand by 7.8 million bags in the 2012-13 season, with arabica beans accounting for almost all of the excess, according to CoffeeNetwork, a unit of INTL FCStone Inc. A bag of coffee weighs 60 kilograms (132 pounds).

“Coffee is rebounding a little after the blood-letting yesterday,” Keith Flury, an analyst at Rabobank International in London, said by e-mail today. “The macro-based selling was likely too much given the supply of arabica currently around and the risk still inherent in this year’s Brazil harvest and the following crops in Colombia and Central America.”

Arabica coffee for July delivery rose 1.3 percent to $1.691 a pound by 9:27 a.m. on ICE Futures U.S. in New York. Robusta coffee for July delivery was up 0.7 percent to $2,198 a metric ton on NYSE Liffe in London.

The arabica coffee surplus will be 7.6 million bags compared with a 200,000-bag excess for robusta beans, Andrea Thompson, head of research and analysis at CoffeeNetwork, said by phone today from Belfast, Northern Ireland. Arabica coffee is grown mainly in Latin America and favored for specialty drinks such as those made by Starbucks Corp. Robusta is harvested mainly in Asia and parts of Africa and used in instant drinks.

Sugar Gains

The beans traded in London have gained 22 percent so far this year, while prices dropped 26 percent in New York as traders sold Arabica coffee in anticipation of a record 50.4 million bags crop in top grower Brazil forecast by the government.

Raw sugar for July delivery was 1 percent higher at 19.71 cents a pound on ICE. White, or refined, sugar for August delivery was up 1 percent at $556.30 a ton on NYSE Liffe.

“Although prices are likely to fall somewhat further in the short term in view of current market sentiment, we expect them to return soon to above the 20 cents mark,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, wrote in a report e-mailed today.

Cocoa for July delivery was down 0.1 percent at $2,122 a ton in New York. Cocoa for July delivery fell 0.3 percent to 1,480 pounds ($2,324) a ton in London.

Bloomberg News

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