Bloomberg News

Brazil Coffee Growers Hoard Supply to Boost Price, Tristao Says

January 31, 2012

Jan. 30 (Bloomberg) -- Brazil’s share of the global coffee market may fall as much as 5 percentage points to 35 percent as suppliers withhold stocks and seek above-market prices, Ricardo Tristao of brokerage Tristao Cia. de Comercio Exterior said.

Arabica coffee from Brazil is trading at about a 15-cent premium relative to New York futures, compared with a usual discount of 15 cents, Tristao said in a Jan. 27 telephone interview from the Isle of Man, where the Vitoria, Brazil-based brokerage has a unit. Arabica for March delivery fell 0.7 percent to $2.1595 a pound at 10:05 a.m. on ICE Futures U.S. in New York.

“Brazilian coffee is a bit uncompetitive right now,” Tristao said. “Producers are withholding some of the coffee, thinking that towards June you’re going to have higher prices.”

Coffee has plunged 25 percent in the past five months in New York partly because of expectation growers in Brazil, the world’s largest producer, will reap a record crop. The price of Brazilian coffee currently exceeds that of countries in Central America, which are still selling at a discount, Tristao said.

Futures may rise to more than $3 a pound if there is a medium to severe frost in Brazil during winter, which runs from June to September in the Southern Hemisphere, Tristao said. If the weather is less severe, the price is likely to remain between $2 and $2.30 a pound this year, he said.

Exports

Coffee exports from Brazil fell to 2.56 million bags in December from 3.13 million bags a year earlier, the country’s Coffee Exporters Council, known as Cecafe, said. Exports may drop to 2.2 million bags in January from 2.79 million bags a year earlier, according to estimates from Rio de Janeiro-based brokerage Flavour Coffee. A bag weighs 60 kilograms, or 132 pounds.

Brazilian growers will harvest 49 million to 52.3 million bags this year, exceeding a record of 48.5 million bags harvested in 2002, crop-forecasting agency Conab said in a Jan. 10 report. Brazil currently supplies about 40 percent of the world’s coffee, including consumption within Brazil, Tristao said.

Coffee harvesting in Brazil runs mostly from April to September.

--With assistance from Lucia Kassai in Sao Paulo. Editor: Carlos Caminada

To contact the reporter on this story: Karen Eeuwens in London at keeuwens@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; Helder Marinho at hmarinho@bloomberg.net


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