Coffee futures in New York may jump 21 percent in two months as roasters scramble to find higher- quality supplies, said Mark Hansen, a trading director at researcher and asset-manager CPM Group. The premium of arabica beans from Columbia, the world’s second-biggest producer, has more than doubled in the past year versus New York futures. The nation’s production dropped to a 33-year low as excess rain and scarce use of fertilizers lowered yields. Arabica inventories monitored by ICE Futures U.S. have extended a slide to the lowest level in seven years.

“Roasters are turning to the exchange as a source of reasonable quality coffee at cheaper prices,” Hansen said today in an interview. “There is also little incentive for producers to deliver against the ICE contract with high physical prices being paid.”

Cash prices of Colombian coffee, the premium variety used in specialty shops such as Starbucks Corp., jumped 44 percent to $2.0486 a pound in the 12 months ended Feb. 19. Arabica futures were up 22 percent. Futures may reach $1.60 in the next two months as inventories dwindle, Hansen said. He structures hedges and trades for producers and consumers at New York-based CPM. The most-active contract last reached that level in February 2008.

Colombia may have below-average rainfall in March and early April, a government weather agency said last week. Bean output won’t recover until after June, after hot, dry weather contributed to a 38 percent drop in January exports, growers said.

Global ‘Deficit’

“The global supply-and-demand balance for coffee is a deficit,” Hansen said. “This deficit is using up existing stockpiles, and should any crops disappoint, then prices should be expected to rise significantly to reflect this.”

World production will be 124 million to 125 million bags this year, compared with demand of 130 million to 132 million bags, according to Nestor Osorio, the executive director of the International Coffee Organization. A bag weighs 60 kilograms (132 pounds).

In Colombia, arabica output will be no more than 9.5 million bags, compared with 8.7 million bags last year, Osorio said on Feb. 8. Production was 12.5 million two years ago.

“The bottom line is that coffee prices are too low,” Hansen said. “They do not reflect the steady increases in demand, while farmers are not earning returns to compensate for their investments in new trees, fertilizer and quality processing of coffee beans.”

Today in New York, futures for May delivery dropped 5.15 cents, or 3.8 percent, to $1.319 a pound. Brazil is the biggest producer of arabica coffee. With assistance from Heather Walsh in Bogota and Maria Kolesnikova in Moscow. Editors: Patrick McKiernan