Coffee Prices Really Perking

Coffee prices surged to five-year highs Friday on the Coffee, Sugar and Cocoa Exchange as damage estimates from a drought in Brazil continued to climb.

Prices jumped by the daily trading limit Friday, even after the exchange expanded its limit to 6 cents from 4 cents in response to the recent surge.

Damage to the crop in Brazil is likely to be extensive, said Kim Badenhop, a coffee analyst in New York with Merrill Lynch Futures. “There’s talk now that the trees are so weak that moderate rain will knock the flowers off the trees.”

Badenhop said much of the rally over the past 10 trading sessions has come from speculative buying. Coffee roasters still have some buying to do, he said, and some analysts believe coffee could reach $2 a pound. A good rain in Brazil could prompt a sharp pullback, however, as coffee already has advanced more than 20 cents a pound since Oct. 23.

The rally in coffee has been supported by civil problems in Uganda that are preventing the country from getting any coffee to shipping ports and by expectations that this year’s Columbian crop will decline from last year.