Coffee Risks Squeezing Starbucks, Hedge Funds as Supply Drops

Bloomberg – An unexpected coffee rally sparked by dwindling supplies risks squeezing Starbucks Corp., Kraft Foods Inc. and hedge funds betting on a decline.

Demand may exceed output by 8 million 60-kilogram bags in the coming year — almost what Germany consumes — and exporter stockpiles are the lowest since 1965, the International Coffee Organization said. Arabica coffee futures may jump 25 percent this year after falling for the first time since 2001 as output drops in Brazil and Colombia, the Western Hemisphere’s top two growers, Goldman Sachs Group Inc. said Feb. 9.

“We see coffee prices increasing in 2009,” Sandra Bachofer, who helps manage $1.2 billion for Zug, Switzerland-based Tiberius Group, said yesterday in a telephone interview. “We expect coffee to be one of the most promising commodities in 2009.”

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