Big Harvest May Cool Down Coffee

By JEAN GUERRERO
MEXICO CITY—Colombia and other high-quality coffee producers are expecting their largest harvest of beans in three years, a shift that could bring prices off their recent highs.

Unless weather damages their crops, Colombia, Mexico, Peru and all Central American countries except for El Salvador are expecting bigger harvests, according to a survey of their national coffee organizations. Combined, output from the countries is estimated to be up at least 2% to 26.35 million 60-kilogram bags in the season beginning Oct. 1.

The area stretching from central Mexico to southern Peru contains the world’s main production of mild, washed arabica beans, which have long fetched a premium to other types of coffee beans because of their sought-after flavor and intense washing process.

Bad weather and old, low-yielding coffee plants have been causing a shortage of the beans since 2008.

The shortage has driven coffee futures on the IntercontinentalExchange about 95% higher over the past three years. This year, futures surged above $3 a pound, a 14-year high.

“If arabica production can rebound a little, especially in Colombia, that will definitely put some pressure on the New York terminal market,” said commodities analyst Keith Flury of Rabobank Group.

The contract for September delivery settled up 0.5% at a five-week high of $2.6615 Friday. Traders said funds were buying futures to cover short positions, or bets that prices would fall.

Colombia is expected to recover some of its production in the season beginning Oct. 1, with traders estimating output at nine million bags.

In another four years, production is likely to return to its pre-2008 average levels of 11 million bags to 12 million bags, according to the Colombian Coffee Federation, or Fedecafe.