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Brazil crunch hits coffee
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September 11, 1998: 5:56 p.m. ET
Emerging-market jitters hurt bean prices on hints Brazil will need to boost sales
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NEW YORK (CNNfn) - Coffee futures dropped sharply Friday as concern grew that Brazil's market woes and the ill health of other Latin American markets might cause them to flood supply into an already-soft market.
The Coffee, Sugar and Cocoa Exchange coffee futures contract for December delivery tumbled 4.85 cents, or roughly 4.4 percent, to $1.0515 a pound, the lowest level in nearly two years.
"One of the things hurting coffee has been concern about selling in emerging markets like Brazil," said Bill O'Neill, chief futures strategist at Merrill Lynch. "And the market hasn't been particularly strong to begin with."
The Bovespa index in Brazil, the world's biggest coffee producer, plunged 16 percent Thursday, as global woes in emerging markets began to catch up with Latin America. Brazil's economy also has been seeing dollar outflows of about $1 billion a day.
Brazil could try to bulk up its ailing overseas currency reserves by selling its hefty stockpiles of coffee to rein in cash, said O'Neill.
Technical analysts, who focus on statistical movements more than issues such as weather, currency prices or the economic situation, also said coffee had fallen through a support level at 110.50 when the December contract fell four cents Thursday to $1.09 a pound.
A technical support level is a point where prices are expected to stop falling, and breaking through such a level can cause prices to erode at a faster rate.
Gold shines again
Gold futures moved higher for a second straight day Friday as the precious metal rode the emerging-market woes, a scandal swirling around President Clinton and continued weakness in the U.S. dollar.
The Comex gold futures contract for December delivery rose $2.80 to $296.60 an ounce, its highest price since July 23, when the precious metal closed at $298.30 an ounce.
"Gold is having a little run, with all that's going on" on the political and economic fronts, O'Neill said. "We're seeing a bit of a flight to quality, but I wouldn't get too excited about it."
Oil futures dip
Crude-oil prices skidded lower Friday after the International Energy Agency reported that worldwide demand may be falling - just when OPEC has tried to cut supply.
The Nymex crude-oil futures contract for October delivery fell 33 cents to $14.34 per barrel.
The IEA, citing a slowdown in demand in China and Russia, sliced its projection for oil consumption in the fourth quarter by 400,000 barrels a day.
For the year, the agency estimates world demand this year will now grow only slightly from 1997 to a 74.5 million barrels a day.
-- by staff writer Jamey Keaten
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