Brazil’s Coffee Growers Seen Holding Back Beans on Minimum Price

By Isis Almeida – May 3, 2013

Coffee producers in Brazil, the world’s largest grower, are holding back beans on speculation the government will raise the minimum price for the commodity, according to Rio de Janeiro-based Flavour Coffee.

The Agriculture Ministry planned to announce a new benchmark in Brasilia yesterday and then canceled. The minimum price guarantees growers receive enough money to cover costs of production. When prices fall below it, the government takes action including buying stockpiles or paying producers the difference between the minimum price and market prices.
“It seems producers are holding back offers on hopes about the announcement of higher minimum prices,” Flavour Coffee said in a report e-mailed yesterday.

Arabica futures rallied as much as 4.2 percent yesterday on speculation the minimum price would be raised.

President Dilma Rousseff authorized an increase in the guaranteed minimum price for arabica coffee to 307 reais a bag, O Estado de S. Paulo reported today, without saying where it got the information. A group of growers proposed an increase in the minimum price to 340 reais ($169) a bag from 261 reais now.

Arabica beans of fine-cup quality from last year’s crop were trading at a discount of 12 cents a pound to the price on the ICE Futures U.S. exchange, according to Flavour Coffee. That compares with a discount of 10 cents a pound last week. Fine-cup quality beans from this year’s crop were at a discount of 16 cents a pound from 14 cents last week, data from the broker showed.

Good-Cup

Coffee of good-cup quality from last year’s crop in Brazil was at a discount of 17 cents a pound, unchanged from last week, data from the broker showed. New crop beans were at a discount of 20 cents a pound, also unchanged. Fine cup beans are usually more expensive because of their taste profile.

“There is still unfilled demand for nearby shipments up to July,” it said. “One major U.S. roaster was searching offers of standard good cup qualities for July and August shipments.”
Conillons, as Brazilian robusta beans are known, were trading at a premium of 7 cents a pound ($154 a metric ton) to the price on NYSE Liffe in London for shipments from May to July, unchanged from last week, Flavour Coffee said.

“Harvesting is ongoing, but slower than usual,” the broker said. “Producers are claiming yield is poorer than last crop. Overall, bean size this crop is smaller than last season.”

Arabica futures for July delivery gained 1.4 percent to $1.4135 a pound by 11:40 a.m. in New York. Robusta coffee for July delivery was up 0.2 percent at $2,023 a ton on NYSE Liffe.