Arabica Coffee Drops on Brazil Rain Forecast

NEW YORK&mdash Arabica-coffee prices dropped 9.1% this week as rains forecast for top grower Brazil fueled the market&rsquo s biggest weekly percentage decline in more than five months.

The December arabica-coffee contract on the ICE Futures U.S. exchange ended 0.9% lower at $1.9150 a pound.

A dry spell in coffee-growing regions will likely break over the weekend, and the rainfall is expected to continue through the first week of November, according to Sã o Paulo-based forecaster Somar Meteorologia.

Drought has already driven down Brazil&rsquo s arabica production this year, and continued dry weather could hurt next year&rsquo s output, growers have said. Some traders are betting this rain may be the start of regular precipitation that could heal the coffee trees. Brazil is the source of about half of the world&rsquo s arabica beans.

The price slide, however, is encouraging some growers to hold off on selling their beans, said Thiago Cazarini, founder of brokerage Cazarini Trading Company in Varginha, Brazil.

&ldquo Producers now are sitting on their own piles of coffee, uncertain of what to do now, but still hoping that prices will climb again to even higher level,&rdquo he said in a note.

Cocoa for December fell 2.2% to $3,050 a ton, the lowest settlement since Oct. 8, after data showed a slowdown in processing of the key chocolate ingredient in Asia.

The Cocoa Association of Asia this week reported a 5.9% drop in third-quarter grindings to 151,643 metric tons. The fall in grindings, a gauge of demand for chocolate, challenges the view that Asia would be the source of growth for cocoa demand, as many countries there have growing middle classes willing to buy affordable luxuries such as chocolate.

Cotton for December gained 1.2% to settle at 63.81 cents a pound, the highest since Oct. 14, after the U.S. Department of Agriculture reported an uptick in sales of the fiber last week.

Orange-juice concentrate for November fell 0.1% to $1.4005 a pound, while raw sugar for March gained 1.4% to settle at 16.38 cents a pound.

Write to Leslie Josephs at [email protected]