Coffee producers in Brazil, the world’s largest grower, are unlikely to “flood” ICE Futures U.S. when the exchange starts accepting delivery of their beans, according to P&A Marketing International.
ICE in New York, where arabica coffee trades, will start taking Brazilian supplies next March. The exchange began grading beans from the South American country this month. The bourse will apply a discount of 9 cents a pound to the coffee. Beans from Colombia, the second-biggest grower of the arabica variety, sell at the exchange price, while coffee from India to Ecuador incurs discounts of 2 cents to 4 cents a pound.
The discount planned by ICE will make it disadvantageous for Brazilian producers to deliver coffee to the exchange, Carlos H.J. Brando, a director at P&A in Brazil, said at the World Coffee Outlook Conference conference in Geneva today. Growers can get better prices outside the exchange, said Brando, whose company also represents Pinhalense SA in Brazil, a maker of coffee-processing equipment.
Brazilian coffee would have to sell in the physical market at a discount of 16 cents a pound or more to the exchange price for delivery to ICE to be profitable for sellers, Volcafe, a unit of ED&F Man Holdings Ltd., said June 8. Beans from the 2012-13 crop now under way were trading at a discount of 5 cents a pound, Volcafe said that day, adding that such a price was already “soft” and a level not seen since the summer of 2009.
Arabica beans, grown mainly in Latin America, are favored for specialty drinks such as those made by Starbucks Corp. (SBUX:US) Robusta beans, harvested mainly in Asia and parts of Africa, are used in instant drinks.
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