Coffee futures subdued after post-hurricane fears

By Lindsey Partos

- Last updated on GMT

Coffee futures are subdued after post-Hurricane Katrina price
spikes, with ongoing stability probable after reports that 700,000
bags of coffee stored in New Orleans warehouses were left undamaged
by the hurricane.

Port Cargo Service, a privately-held New Orleans storage handler with 28 warehouses in the city, reported that they have "no odours, no unusual humidity or toxicology problems, and suffered no losses in our seven coffee warehouses."

Prices for the omnipresent beverage and confectionery ingredient coffee leapt last week after flooding caused by Hurricane Katrina put inventories of beans in New Orleans at risk.

New Orleans houses some 1.6 million bags of coffee, a 27 per cent chunk of the US' total six million bags. That just over half of the stock, some 730,000 bags, are certified is likely to bring stability to prices.

There are about 110million bags worldwide.

"The market initially rallied by around 10 per cent in New York after the hurricane, but has subsequently lost it,"​ a coffee trader at London-based Sucden tells FoodNavigator.com​.

Indeed, on Monday morning Robusta coffee for November delivery on Liffe came in at $941 a tonne.

This marks a significant dip after the knee jerk highs of $1040 per tonne registered immediately after the hurricane on fears that the coffee stocks would be lost.

New Orleans is the second-largest coffee port in the US. Port Cargo Service, together with the firms Jackson and Dupuy, are the three major storage handlers in the city. According to the Sucden coffee trader Dupuy said they had some damage, while the market is waiting to hear from Jackson.

After a sharp decline in the past five years, that saw the prices plunging on oversupplies, lower production figures for 2005/06 have created a bullish climate for coffee.

Forecasts from the US department of agriculture pitch global production for the period at 113.1 million bags (60 kilograms), down about 6 per cent, or 6.7 million bags on the previous year.

Most of the decrease is attributed to the drop in Brazil's 2005/06 coffee production level to 36.5 million bags, a 14 per cent fall on 2004/05.

Indeed, in recent months beverage makers have hiked up their prices. At the end of last year Kraft Foods said it would raise the price of a 13-ounce jar of Maxwell House instant coffee by 14 per cent to $2.29, in response to a surge in the price of coffee beans.

The firm's announcement came on the heels of a 14 per cent increase in ground coffee prices in early December by Folgers, a division of Proctor & Gamble.

A harbinger of further price rises, according to US reports last week, P&G has more than 50 per cent of its coffee production in New Orleans.

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