Colombia Coffee Premium Jumps on Output Drop

The spread between Colombian coffee prices and New York-traded futures may keep rising after production fell to a 33-year low, said Rodrigo Costa, a vice president of institutional sales at Newedge USA LLC.

The CHART OF THE DAY shows the widening of the price differential between coffee in Colombia and New York. The premium touched 77.2 cents a pound yesterday, the highest since June 3. A second CHART shows annual Colombian output, which fell 32 percent to 7.8 million bags in 2009, the lowest since 1976, the Colombian National Coffee Growers Federation said Jan. 21.

Demand “for better quality coffee would still favor widening differentials for Colombian coffee,” Costa said Jan. 26 in a telephone interview from New York. There’s “still very scarce availability.”

The premium may begin to narrow in March as warmer weather in the Northern Hemisphere eases coffee demand and as traders expect higher production, he said.

Colombia’s harvest will rise to between 11 million and 12 million bags this year, Luis Genaro Munoz, the federation’s chief executive officer, said last week. Each bag of coffee weighs 60 kilograms (132 pounds).

Colombia fell to the world’s fourth-largest coffee producer from third because of last season’s crop, according to the International Coffee Organization, which tracks countries output based on the crop year that started Oct. 1.

Source : Bloomberg