Coffee Futures Rise in New York as Dollar Drops, Equities Rally

By Yi Tian

Nov. 24 (Bloomberg) -- Coffee rose the most in more than a week as the declining dollar boosts demand for U.S. commodities and a rally in equities signals improved confidence in the economy.

The dollar fell for the second day against the euro after the U.S. government said it will guarantee $306 billion of troubled Citigroup Inc. assets. The Dow Jones Industrial Average was heading for its biggest gain in more than a week and the Reuters/Jefferies CRB Index of 19 raw materials rose as much as 5.4 percent.

“The dollar sounds pretty good today,” said Fain Shaffer, president of Infinity Trading Corp., a commodities brokerage in Medford, Oregon. “The Dow is up and many people use that as a gauge for demand.”

Arabica-coffee futures for March delivery gained 3.3 cents, or 3 percent, to $1.1405 a pound on ICE Futures U.S. in New York. That’s the biggest gain for a most-active contract since Nov. 12.

The Standard & Poor’s 500 Index was up 7 percent at 3:39 p.m. New York time after posting a gain of 6.3 percent on Nov. 21. The gauge was headed for the biggest two-day rally since 1987.

“Things livened up as a general improvement in stock markets saw a more positive mood spill over into primary commodities and in general across the complex, resulting in a further jump in coffee prices,” Ryan Bennett, a coffee and cocoa trader at Sucden (U.K.) Ltd., wrote today in a report.

Coffee also rose as cold weather in the Northern Hemisphere spurs consumption of the hot beverage, Shaffer said.

“The peak demand time for coffee is winter,” he said. “There’s technical buying going into this period of time.”

Lack of selling pressure helped too, said Jack Scoville, the president at Price Futures Group in Chicago.

Between Harvests

“We’ve passed the guts of the Brazil harvest now and Central America is just getting into harvest,” Scoville said. “There aren’t big sellers right at the time.”

Brazil is the world’s biggest producer of arabica beans and the second-biggest for robusta, trailing Vietnam. Vietnamese export growth slowed through November as stagnant global economies curbed demand for the nation’s products.

Arabica beans, the main variety traded in New York, are grown mostly in Latin America and are used by specialty coffee companies including Starbucks Corp. Robusta beans, mostly traded in London, are used in instant coffee and are mainly grown in Asia, Brazil and Africa.

In London, robusta coffee for January delivery rose $82, or 4.5 percent, to $1,895 a metric ton on the Liffe exchange.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.