Arabica coffee prices hit highest in nearly half a century
Refiles to remove SOFTS headline tag
LONDON, Nov 27 (Reuters) -World arabica coffee price benchmarks climbed above $3 per lb to hit their highest in nearly half a century with farmers in Brazil still reluctant to sell, speculators piling in, and talk of panic buying amongst the trade.
Farmers in Brazil, who grow almost half the world's arabica, have sold up to 70% of the current crop and are in no rush to sell forward next year's crop, betting on even higher prices, according to dealers and industry experts.
Meanwhile two industry sources told Reuters there is talk a medium sized coffee trader in Brazil has run out of cash.
"Brazil farmers are not interested in selling, the trade has no cash and can't sell or put on new hedges, and speculators will certainly not sell, so there are not many sellers," said a coffee expert at one of the world's top agricultural trade houses.
He added talk of traders running out of cash was not helping, and that while it remains unclear where the rally will end, it is likely a solution to the shortage will not appear anytime soon.
March arabica coffee futures KCc2 on the ICE exchange, used to set physical coffee prices around the world, rose 2.5% to $3.1640 per lb at 1505 GMT, having hit their highest since 1977 earlier at $3.2100.
The contracts are up around 70% this year, while January robusta coffee LRCc1, used to price the cheaper coffee variety typically used in instant coffee blends, was up 4% at $5,316 a metric ton.
Arabica and robusta are to some extent fungible, so shortages in one often increase demand and prices for the other.
Trader Sucafina said fears producers might default or delay deliveries coupled with increased hedging costs - due to pricier margin calls - are leading to panic, tempting traders to close out their hedges by buying futures.
Next year's Brazil crop appears to have lost some potential following the drought earlier this year, with soil moisture still low despite recent rains, and fears the current flowers may not attach to the branches and form cherries for picking.
"A mix of rain (and) dry periods are expected into next the week, but the condition of the trees is the main question," said broker ADMISI.
There are also worries meanwhile that the harvest in top robusta producer Vietnam has been delayed by heavy rains.
In other soft commodities traded, March raw sugar SBc1 was up 0.7% at 21.73 cents per lb, having marked seven consecutive weeks of losses last week, while March white sugar LSUc1 gained 1.3% to $562.50 a ton.
March London cocoa LCCc2 was down 2% at 7,483 a ton, having hit a five-month high of 7,678 pounds on Tuesday, while March New York cocoa CCc2 fell 1.4% to $9,111 a ton.
Reporting by Maytaal Angel; editing by Jonathan Oatis
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