Coffee slips on speculation supplies are building
Tuesday, March 22, 2011; 4:27 PM
-- Coffee futures slipped Tuesday on speculation that some growers may sell stockpiles soon, which could ease tight global supplies.
Coffee for May delivery fell 3.55 cents to settle at $2.7345 a pound.
The price jumped 77 percent in 2010 and has continued to climb this year, hitting $2.944 a pound earlier this month. Meanwhile, global supplies have shrunk.
Brazil and Vietnam had good harvests last year, but many growers have held their supplies in hopes of selling at higher prices, said Spencer Patton, founder and chief investment officer for hedge fund Steel Vine Investments LLC.
That has led to fairly steady declines in supplies at the ICE Futures Exchange warehouses. In the past week, however, those warehouses have recorded small increases in inventory, which could be an indication that some producers may be more willing to sell, he said.
"As soon as the producers in Brazil and Vietnam see that prices have probably peaked out, you could see a rush of supply onto the market that would generate quite a bit of downside pressure," Patton said.
In the meantime, consumers continue to see the impact. Starbucks Corp. said late last week it was raising the prices it charges retailers for packaged coffee by up to 12 percent to cope with higher costs for beans.
J.M. Smucker Co., which sells Folgers and Dunkin' Donuts brands, Sara Lee Corp., Kraft Foods Inc. and Green Mountain Coffee Roasters Inc. also have raised prices.
In other trading, oil prices rose as traders focused on clashes in the Middle East that could tighten global supplies when consumption is expected to increase because of improving economies.
Benchmark West Texas crude for May delivery gained $1.88 to settle at $104.97 per barrel on the New York Mercantile Exchange.
In Nymex trading for April contracts, heating oil added 2.37 cents to settle at $3.0762 per gallon, gasoline rose 0.71 cent to $3.0045 per gallon and natural gas gained 9.3 cents to $4.254 per 1,000 cubic feet.
Metals were mixed while grains and beans settled higher.
In contracts for May delivery, gold rose $1.20 to settle at $1,427.60 an ounce, silver added 26.8 cents to settle at $36.269 an ounce and copper gained 2.7 cents to $4.313 a pound.
April platinum fell $5.50 to settle at $1,739.40 an ounce and June palladium lost $4.45 to $737.85 an ounce.
Wheat for May delivery rose 1.25 cents to settle at $7.2225 a bushel, corn added 0.25 cent to $6.8675 a bushel and soybeans rose 2.5 cents to $13.655 a bushel.