Bloomberg News

Brazil’s Fine Coffee Premium Slides; Good Cup Discount Increases

March 23, 2012

The premium buyers are prepared to pay to obtain fine cup coffee from Brazil, the world’s largest producer, slid over the past week and the discount for good cup beans increased, according to broker Flavour Coffee.

Fine cup coffee for shipment from April to June is at a premium of 2 cents a pound to the price on the ICE Futures U.S. exchange in New York, down from 4 cents a pound last week, the Rio de Janeiro-based broker said in a weekly report e-mailed yesterday. Good cup quality beans for shipment in the same period were at a discount of 12 cents a pound to the exchange price, compared with 10 cents last week, the broker said.

“Differentials of current crop for April and June shipments are overall softer for both fine and good cup qualities,” Flavour said in the report, referring to the premium or discount to obtain physical coffee in relation to the futures price. “Fine cup qualities were offered in vain.”

Growers in Brazil may still be holding back 15 percent to 20 percent of the 2011-12 crop that started in July, Kona Haque, an analyst at Macquarie Group Ltd. in London, said in a report e-mailed on March 20. Producers and cooperatives were “disciplined sellers”, only offering beans when the price in the international markets rose, according to Flavour.

Arabica coffee has fallen 22 percent in New York so far this year as traders sold the beans in anticipation of a record crop in Brazil. The price touched $1.7445 a pound yesterday, the lowest since October 2010. The 2012-13 crop may be a record 49 million to 52.3 million bags as trees enter the higher yielding half of a two-year cycle, the government estimates.

Producers and cooperatives shouldn’t regret missed selling opportunities as they’ve been “disciplined” sellers during moves higher and had a good selling-price average this season, Flavour said.

Arabica coffee is grown mainly in Latin America and favored for specialty drinks such as those made by Starbucks Corp. Brazil is the world’s largest Arabica producer followed by Colombia. A bag of coffee weighs 60 kilograms or 132 pounds.

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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