Bean counters note: coffee at 10-year high

The price of coffee surged Thursday, hitting its highest level in a decade, as continuing weakness in the dollar kept many commodity markets in rally mode.

Coffee futures for May delivery rose 3.4 cents, or 2.1%, to $1.675 a pound in New York. Earlier in the day, the beans traded at $1.68, the highest price for a most actively traded contract since February 1998. Coffee is up 41% in the last year.

The slide in the dollar has been lifting nearly all commodities, including oil, gold, corn and soybeans, all of which touched record highs Thursday. A UBS-Bloomberg commodity index also hit a record, rising as much as 1.8%.

The dollar marked another in a string of lows against the euro Thursday, and an index of the dollar’s value against six major currencies also hit a record low, prompting investors to buy commodities as an inflation hedge.

“All the crude oil available is being vacuumed up by investors, in part because interest rates are low and there’s no alternative to commodities that looks very good,” said Tim Evans, an analyst at Citigroup Global Markets Inc.

Much of coffee’s rise has been driven by speculation rather than supply and demand of the physical commodity, analysts said.

Coffee is now “a playground” for investment funds, Nestor Osorio, executive director of the London-based International Coffee Organization, told Bloomberg Television.

The good news for coffee drinkers is that rain in Brazil, the biggest producer of coffee, has increased since October, when dry weather spurred concern the crop might shrink.