FUTURES FILE: Frothy coffee prices near $3

FUTURES FILE: Frothy coffee prices near $3

By Walt Breitinger Times Business Columnist | Posted: Saturday, March 12, 2011 12:00 am | Loading…

Coffee prices neared $3 per pound this week for the first time in 14 years. Since last June, prices have more than doubled as coffee production out of Central American nations, Brazil and Columbia, have fallen short of expectations.

The low level of production, coupled with strong demand from India, Japan and China, has drained some coffee warehouse supplies to an 11-year low. These factors culminated on Wednesday, pushing prices as high as $2.96 a pound, prompting coffee traders to hope that coffee futures would break above the 1997 high of $3.18 a pound.

Instead, prices crashed on Thursday and Friday, dropping to $2.72 a pound, an 8 percent drop in two days. This week's wild 22-cent range shows how frothy the price of your morning coffee can be. Luckily, many corporations and distributors can reduce their exposure to these headaches by locking in prices months in advance, thereby avoiding the need to change prices daily.

Corn Gets Creamed

King corn had led the commodities rally for the last year, but suffered a significant setback this week, losing more than 70 cents per bushel (10 percent). A Department of Agriculture report released Thursday morning contributed to the decline, as it showed an increase in global grain production, indicating the U.S. grain stocks might not be as tight as previously thought.

The still-high corn prices have encouraged farmers to maximize their corn acreage and to pre-sell this year's crop, locking in prices. Investor selling, alongside a significant drop in crude oil, which fell $6 per barrel this week, also contributed to the drop in corn prices. Soybeans and wheat were pulverized as well, falling 90 cents (7 percent) and $1.30 (16 percent) per bushel, respectively.

Global grain buyers have been shopping around, looking to Southern nations like Brazil, Argentina and Australia as a cheaper source of corn, wheat and soybeans, further undermining U.S. grain prices.

As of midday Friday, corn for May delivery was near $6.67 per bushel, May beans were at $13.37 per bushel and May wheat had ground to $7.26 per bushel.\



Opinions are solely the writer's. Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso. He can be reached at (800) 411-3888 or indianafutures.com. This is not a solicitation of any order to buy or sell, nor does it provide any recommendations regarding the market