Brazilian coffee trade timid despite ICE price rises

31-07-2009

SAO PAULO – Brazilian coffee traders failed to agree on prices this week despite soaring futures in New York, coffee industry specialists said.

September coffee on Thursday settled up 210 points at $1.2495 a pound and the December contract settled 215 points higher at $1.2810 a pound, propelled by climbing equities and commodities markets.

“We have seen a lot of demand [for coffee], but buyers aren’t willing to pay the coffee prices,” said John Wolthers, a trader at coffee exporter Comexim in Santos.

Coffee trades were being done this week at tighter differentials of around 21-22 points under the December New York coffee futures for September shipments, Wolthers said. Coffee specialists added that increasing concerns exist about the unseasonable rain that could impact the quality of the coffee for the ongoing 2009-10 crop season as well as 2010-11.

Recent rains in July knocked some beans off the branches or caused fermenting that affects the taste. Rains can also trigger early flowering on the coffee bushes that will raise chances of impaired quality.

This can lead to a lower quality and less high quality washed or semi-washed beans, said Wolthers.

Still, in Brazil’s south of Minas Gerais, Brazil’s No. 1 coffee-growing region, “good” weather is arriving, according to local weather service Somar Thursday.

Weather should remain dry Friday and during the weekend in the south of Minas Gerais, a meteorologist at Somar said.

This will allow the farmers to dry their beans and speed up the harvest.

A coffee trader in Santos said that one dollar slid to BRL1.87 on Thursday. This further damped producers’ willingness to sell as they get less cash for their beans in the local currency. Roasters and industry buyers have good stocks and the summer vacations in Europe and the U.S. also reduces buying interest, industry specialists said.

Nonetheless, standard arabica coffee beans were being sold at BRL240 on Thursday for a 60-kilogram bag, said Marcio Bernardo, a coffee analyst at Newedge USA in New York.

He warned that Brazilian farmers are still speculating for even higher prices. They eye BRL280-290 per bag, he said.

If this happens, they will then also search for BRL300 per bags, he said.

The same pattern is played out in the futures market, as roasters are just buying light amounts and origins aren’t fixing much coffee, he said.

Brazil is the world’s No. 1 coffee producer.