Arabica-coffee prices surged Thursday to the highest level in 2½ months as traders and investors continued to worry about the size of Brazil's current and upcoming harvests. Arabica coffee for delivery in September on the ICE Futures U.S. exchange was recently up 4.5% at $1.9065 a pound, the highest since May 16. We have had numerous consecutive reports from coffee cooperatives and organizations in Brazil indicating lower production, said Sterling Smith, a futures specialist at Citigroup in Chicago. The market is realizing that yes, we have a severely compromised crop. The worst drought in decades for Brazilian coffee growers has affected the development of plants and is expected to reduce next year's harvest as well. Brazil's National Coffee Council expects the 2014 and 2015 coffee harvests to produce about 40 million 132-pound bags of coffee each. Its forecast for the current year is about 20% smaller than its original estimate as a severe drought has curbed production. If we hadn't had weather problems, we would have expected more than 50 million bags in 2015, National Coffee Council President Silas Brasileiro told The Wall Street Journal. In addition, rains now in Brazil's coffee-growing areas could trigger early flowering of the coffee trees, which would mean an even weaker coffee harvest next year. Anything that prematurely flowers right now is already going to be as nonproducer for next year, Mr. Smith said. This is going to make next year's crop even more problematic. He said futures could crack $4 a pound by 2016 if the crops in Brazil continue to disappoint. Coffee production at Cooxupe, Brazil's biggest coffee cooperative, will be about 30% less than it had initially forecast this year because of the drought, the group's president said Tuesday. Cooxupe will produce about 4.1 million 132-pound bags of coffee this year, President Carlos Paulino da Costa said, compared with the 6 million bags the cooperative had predicted before Brazil's worst drought in decades started in January. Cooxupe has nearly 12,000 members. In other markets, orange juice for delivery in September was down 0.8% at $1.3850 a pound, the lowest level since Jan. 30, and September-delivery cocoa was 0.1% lower at $3,202 a ton. Raw sugar for October delivery was down 0.6% at 16.53 cents a pound, and cotton for delivery in December slid 0.7% to 63.58 cents a pound, a fresh low since Oct. 12, 2009. Source: online.wsj.com/articles/arabica-coffee-futures-jump-on-brazil-production-forecasts-1406814821