Goldman Sachs Cuts Arabica Coffee Forecasts by 7.7% on Weather
Goldman Sachs Group Inc. cut its price forecasts for arabica coffee traded in New York by 7.7 percent, citing favorable weather and the biggest stockpiles of the variety favored by Starbucks Corp. (SBUX) in five years.
The beans traded on the ICE Futures U.S. exchange will be at $1.20 a pound in three, six and 12 months, the bank said in a report e-mailed today. That’s down from last month’s forecast for $1.30 a pound. Arabica coffee futures fell 20 percent this year on signs of bigger harvests in leading producer Brazil and Colombia, the second-biggest grower of the variety.
“Arabica coffee prices continued to decline last month on larger than expected Colombian production and favorable weather for the upcoming crop in Brazil,” Damien Courvalin, an analyst at the bank in New York, wrote in the report.
Futures are heading for a third year of declines, the longest losing streak since 1993. The commodity is the fourth worst performer this year in the Standard & Poor’s GSCI gauge of 24 raw materials, with only gold, silver and corn down by more. Stockpiles at the end of this season will be 30.5 million bags, the highest since 2008-09, estimates the U.S. Department of Agriculture. A bag of coffee weighs 60 kilograms (132 pounds).
Coffee prices could rebound if there are further cuts to production in Central America, where leaf rust disease has hit crops, or if funds decide to close out bets on lower prices, Goldman said. Large and small speculators excluding index funds have been betting on lower prices since 2011, data from the U.S. Futures Trading Commission compiled by Bloomberg showed.
Arabica coffee for December deliver was little changed at $1.1475 a pound on ICE by 5:53 a.m. in New York.