Goldman Lowers Arabica Coffee Price

By Isis  Almeida
     April 23 (Bloomberg) -- Goldman Sachs Group Inc. lowered its  price forecasts for arabica coffee futures in New York, citing an improving  production outlook in leading grower Brazil.     Prices will be at $1.45 a
pound in three, six and 12 months, the bank said in a report e-mailed today.  That is down from previous forecasts of $1.55 a pound, $1.65 a pound  and $1.75 a pound, respectively, it said. Arabica futures for delivery in  July fell 0.6 percent to $1.4225 a pound by 9:14 a.m. on the ICE Futures U.S.  exchange in New York.
     Brazil will harvest 47 million to 50.2 million  bags of coffee this year, Conab, the government’s crop-forecasting agency,  estimates. That is down from 50.8 million bags a year earlier and may be a
record for a year in which trees enter the lower-yielding half of a two-year  cycle. “Although 2013-14 is the low-yielding production year in Brazil’s  biennial cycle, favorable rains in March point to an even larger off-year
crop, already forecast to reach record volumes,” Damien Courvalin, an analyst   at Goldman Sachs in New
York, wrote in the report. “The arabica market will  likely only be in a modest deficit or even remain balanced in
2013-14.” The improved outlook for the crop in Brazil means supplies there  will compensate for production losses caused by coffee leaf rust disease in  Central America, he said. The epidemic is the worst case since the disease  appeared in the region in 1976, according to the International Coffee  Organization in London.

                       Leftover Sales

      While further cuts to production estimates in Central America may “provide  modest support to prices,” sales of leftover stockpiles from the last crop in  Brazil may “weigh on prices in coming months,” according to Goldman
Sachs.     Brazilian growers sold 75 percent of the 2012-13 crop by March   31, down from 86 percent a year earlier, Gil Barabach, a market analyst at   Safras & Mercado, estimates.      The global sugar market is heading for
a third year of surpluses in the 2013-14 season that starts in October in  most countries, the bank said. Excess supplies will result from a large   sugar cane crop in Brazil’s center south, the main growing region of the
world’s top producer, and as growers continue to replant. “The increase in   Brazil sugarcane crush will allow for
both an increase in sugar and ethanol   production,” Courvalin said.