Bloomberg News

Coffee Council Urges Brazil Growers Not to Panic as Price Slumps

March 09, 2012

The National Coffee Council in Brazil, the world’s largest producer of the commodity, has urged growers not to panic after prices slumped 17 percent this year.

Arabica coffee prices traded in New York closed at $1.9305 a pound on the ICE Futures U.S. exchange on March 6. That was the first time that the market ended below $2 a pound since Nov. 3, 2010, data on Bloomberg show. The beans, which are grown mainly in Latin America and favored by Starbucks Corp. (SBUX), have slid 8.2 percent in the past two weeks alone.

“The movements have nothing to do with market fundamentals, which we understand to be positive,” Silas Brasileiro, president of the council, known as CNC, wrote in a weekly report e-mailed today. “In this moment of instability we believe, as we said in previous reports, that the producer should not panic.”

Supply and demand fundamentals continue to be “tight,” Brasileiro said in the report. Global inventories remain limited and consumption continues to grow, he said.

The council is working with the government to ensure that financing is available to growers to guarantee that prices won’t be impacted because producer sales are concentrated in a small period of time, according to the report.

Brazil plans to double financing available for coffee storage this year to 1.5 billion reais ($840 million), Edilson Martins de Alcantara, director of the coffee department at the Ministry of Agriculture, said in an interview in London on March 6. The proposal may be approved as early as this month, he said.

“The aim is to enable the producer to store coffee and to sell it at the best opportunity,” de Alcantara said during meetings of the International Coffee Organization.

Coffee output in Brazil will likely rise to a record in the 2012-13 season starting in July as trees enter the higher- yielding half of a two-year cycle, the government estimates. Production will be 49 million to 52.3 million bags, exceeding the high of 48.5 million bags in 2002, according to a Jan. 10 report from Conab, the government’s forecasting agency.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at Ccarpenter2@bloomberg.net.


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