Coffee May Be Commodity ‘Superstar’ as Oil Falls:
Coffee may be the best-performing commodity this year as cheaper energy leaves consumers with more disposable income and global production declines - Bloomberg
1/12/2009

Jan. 12 (Bloomberg) -- Coffee may be the best-performing commodity this year as cheaper energy leaves consumers with more disposable income and global production declines, said Sterling Smith, a vice president at FuturesOne in Chicago. The CHART OF THE DAY shows that coffee futures may rise 25 percent to $1.463 a pound on ICE Futures U.S. in New York by the end of the year as crude oil plummets 43 percent to $23.35 a barrel, Smith said in an e-mailed report. Coffee on ICE Futures closed at $1.169 on Jan. 9, and oil traded at $40.83 a barrel on the New York Mercantile Exchange. Oil, which quadrupled over four years to a record $147.27 on July 11, was the “culprit” of the global financial crisis because consumers spent more on gasoline and less on food and other goods, Smith said. Coffee fell 18 percent last year, as the Reuters/Jefferies CRB Index of 19 commodities had its biggest annual drop in more than five decades. “Higher energy prices resulted in a domino effect of demand destruction that pollinated throughout the economy,” Smith said. “The drop in energy prices will have a much faster healing effect than they did a destructive one. It is my opinion that as long as every effort is made to keep energy prices in line, an economic recovery will come soon rather than later.” Shrinking global production of coffee may make the commodity a “superstar,” he said. Output in Brazil, the world’s biggest coffee grower and exporter, may drop as much as 20 percent this year as the global credit crunch made it more difficult for farmers to pay for fertilizer, the Agriculture Ministry said on Jan. 8. The nation’s coffee trees also are entering the slower half of their biennial growth cycle.