Bloomberg Coffee Prices Jump Most Since January as Inventories Decline

May 1 (Bloomberg) -- Coffee prices in New York jumped the most since January as inventory declines spurred speculation that supplies will trail demand.

Stockpiles at warehouses certified by ICE Futures U.S. have dropped every month since October and tumbled 18 percent from a four-year high on Oct. 24. The price of the commodity has climbed 7.5 percent this year, partly on supply concerns.

“Coffee has extremely strong fundamentals, and prices will remain supported,” said Jaime Menahem, a trader at Alaron Trading Corp. in Miami. “The large reduction in warehouse stocks is helping prices.”

Arabica-coffee futures for July delivery rose 4.5 cents, or 3.9 percent, to $1.204 a pound on ICE in New York. That marks the biggest gain for a most-active contract since January 6.

Futures also rose after Brazil said it will seek a higher minimum price for government purchases of beans to help boost farmer income, Menahem said.

“The government in Brazil is taking action, and that’s also helping support the price,” Menahem said. “It makes the overall fundamental picture stronger.”

Brazil, the world’s biggest coffee producer, may buy as many as 3 million bags of beans, Agricultural Production Secretary Manoel Bertone said on March 12. Government purchases will further reduce coffee available for exports in a year when the country’s output is set to drop. A bag of coffee weighs 60 kilograms, or about 132 pounds.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.