REPORT

Rhetoric, politics and individual  interpretation about a given issue are the best- besides weather forecasts, of course- tools for speculation.
 
During an interview that was broadcasted from Varginha this week, Mss Russef, as any politician that was not clearly briefed about any given subject, heartedly announced  the subsidy program that has been in the Gov agenda since 2012.
 
However, she brought it up by making three statements that are exclusionary: PEPRO, purchase of coffee and trigger price.
 
 
PEPRO: is the short for the federal program that sells the option to get refunded back (subsidy) by the Gov if  marketed price is below the minimum guarantee price (now officially pegged at R$ 307 per 60 kg );
 
Purchase of coffee: up to 3.0 million bags and that alone nullifies the announcement of the PEPRO.

This has generated a lot of uncertainty , not only in Brazil but also among importers.
 
Things have become even more unclear because , as of today, there has been no further news about when it will be officially published on the “Official Journal” (Diario Oficial) as it is absolutely necessary for the market to know for sure what the actual terms are;
 
Trigger price: Mss Russef has mentioned R$ 346.00 per 60 kg as the trigger price for the selling options, which is pretty close to the average between the current minimum guarantee price of R$ 307 and R$ 390 pledged by famers’ representative, CNC, for Natural Arabica NY 4, good cup (BMF terminal´s standards).
 
That said, the Ministry of Agriculture SHOULD  have already included in its budget for 2013/ 14 a total of R$ 1.04 billion Reais (R$ 2.29 today)  in order to comply with such program.
This far only R$ 390 million has been authorized by the National Monetary Council (CMN) which was supposed to finance the subsidy (PEPRO) plan.
 
Related news hereby reported:
June 20th:
qte
 
(….) The National Monetary  Council (CMN) has approved on June 18th , effective as of July 1st’, 2013, the original proposition to use FUNCAFE`s R$ 3.2 billions credit for coffee growers (US$ 1.5 bi) to finance the harvest (R$ 650 mill)  , warehousing (R$ 1.14 bill)  and hedging (R$ 50 mill) of the 2013/ 14 ( new) crop and purchase of coffee ((R$ 500mill) and working capital (soluble industry up to R$ 150 mill, roasters R$ 200 mill and coops R$ 450 mill) by exporters and local industry  .
 
The balance R$ 20 mill can be used to renew old plated areas and last but not least it is important to bear in mind that all previous credit lines due in 2013 had already been postponed until July 2014.
 
Unqte
 
June 27th:
 
Qte
 
(…) The Minister of Agriculture has obtained CMN’s approval for additional (i.e. further to R$ 3.2 bill previously released) R$ 390 million credit for the PEPRO program intended to subsidize farmers whenever market prices are below the minimum guarantee price (i.e. at that point pegged at R$ 307 without questioning)
 
Unqte
 
Last but not least, it is worth reminding that the minimum guarantee price alone is a very honest and effective way to withdraw a large quantity of coffee off the market: i.e. farmers and coops can warrant their stocks and use it as a collateral to the credit lines offered by the banks to finance harvesting, stocking, trading, hedging of the new crop.
 
Traditionally in Brazil only about 60-70% of all credit made available is taken by the big producers, coops and industry.
 
Industry loans dismissed, it means that at least 1,5 mill bags have already been withdrawn off the market as a guarantee to the new loans.
 
Arabica coffee quotations per 60-kg bag
 
                                    In  R$             In US$                                                          
 
Jul 24                          281,93             125,30                                              
 
Jul 31                          285,74             125,44                                              
 
Aug 5                          288,61             125,48                                              
 
Aug 6                          283,53             123,33                                              
 
Aug 7                          287,03             124,26                                              
 
 
 
Brazil has shipped 2,158,640 bags (178,006 bags of Conilon and 264,009 bags of soluble coffee)  in July, 2013, according to CECAFEs official figure.
 
That compares with 2,123,889 bags (174,326/ 265,173) shipment in July 2012.
 
FOB prices reported this week:
 
SANTOS 17/18 SS FINE CUP SEP13- MAY14 SHIPMENT NY MINUS USC 6.00 TO MINUS USC 8.00/ LB
 
SANTOS MTGB SS FINE CUP SEP13- MAY14 SHIPMENT NY MINUS USC 10.00 TO MINUS USC 13.00/ LB
 
DD WITH WOLTHERS SEP13- MAY14 SHIPMENT NY MINUS USC 6.00 TO MINUS USC 9.00/ LB
 
SANTOS 17/18 SS GOOD CUP SEP13- MAY14 SHIPMENT NY MINUS USC 13.00 TO MINUS USC 14.00/ LB
 
SANTOS MTGB SS GOOD CUP SEP13- MAY14 SHIPMENT NY MINUS USC 17.00 TO MINUS USC 19.00/ LB   
 
RIO MINAS 17/18 SEP- OCT SHIPMENT USDOL 108.00 TO USDOL 110.00/ 50 KG

RIO MINAS 15/16  SEP- OCT SHIPMENT USDOL 98.00 TO USDOL 100.00/ 50 KG

CON 13 UP SEP- NOV  SHIPMENT LIFFE PLUS USC 5.00 TO PLUS USC 7.00/ LB  
 
NATURAL GRINDERS MAX 250 DEFFECTS FINE CUP SEP13- MAY14 SHIPMENT NY MINUS USC 20.00 TO MINUS USC 22.00/ LB   
 
NATURAL GRINDERS MAX 300 DEFFECTS GOOD CUP SEP13- MAR14 SHIPMENT NY MINUS USC 24.00 TO MINUS USC 26.00/ LB 
 
SEMI WASHED 15UP SS FC NEW CROP SEP- DEC SHIPT NY MINUS USC 4.00 TO MINUS USC 6.00/ LB

FULLY WASHED BAHIA 15 UP SS FINE CUP NEW CROP SEP- DEC SHIPMENT NY MINUS  USC 2.00 TO MINUS USC 4.00/ LB
 

YOUR COMMENTS WILL BE APPRECIATED

REGARDS
 
 
 
GILMAR VIEIRA
55 27 3325 3123
gvctrade@gvcoffee.com.br