Bloomberg News

Brazil’s Robusta Coffee Premium Rises as Local Roasters Purchase

July 20, 2012

Buyers of robusta coffee from Brazil, the world’s second-biggest producer of the variety, are paying a bigger premium for their beans as local roasters and soluble industry make purchases, according to Flavour Coffee.

Conillons, as Brazilian robusta beans are known, are at a premium of 10 cents a pound ($220 a metric ton) to the NYSE Liffe exchange in London for August shipment, the Rio de Janeiro-based broker said in a report e-mailed yesterday. That compares with 7 cents a pound a week earlier, data from the broker show. Robusta beans are used in instant coffee and espresso and are harvested mainly in Asia and parts of Africa.

“Differentials remain at high premiums over Liffe, even considering the new Liffe level this week,” Flavour Coffee said in the report. Differentials refer to a discount or premium paid to obtain physical coffee in relation to the futures price.

“New buying” from roasters and the instant coffee industry, associated with short-covering and higher prices in London have “given additional fuel” to the market, the broker said. Short-covering denotes purchases to close out bets on lower prices.

Robusta coffee prices have climbed 6.7 percent in London so far this week as supplies from top-producer Vietnam remain limited as the harvest there approaches an end. Beans from third-ranking Indonesia were trading at a premium to the exchange price last week, according to Volcafe, the coffee unit of commodities trader ED&F Man Holdings Ltd.

Arabica Discount

Buyers of arabica coffee from Brazil continued to get the same discount as last week even as the price on the ICE Futures U.S. exchange in New York climbed 1.1 percent, the broker said.

Fine cup coffee for shipment in September to December is getting a discount of 12 cents a pound to the ICE price, according to the report. Good cup quality beans for August and September are trading at a discount of 20 cents a pound. Fine cups are usually more expensive because of their taste profile.

The “market is going up and so far the differentials are pretty much the same as last week,” Thiago Cazarini, a broker at Varginha, Brazil-based Cazarini Trading Co., said in a report e-mailed yesterday. “On the external market, demand increased for quick, prompt shipments, but also the availability of coffee for these inquiries is far below the demand.”

Rains last month delayed the crop and are threatening to reduce the quality of beans. Harvesting in Sao Paulo and Minas Gerais, Brazil’s biggest arabica-producing states, has reached only 10 percent to 20 percent of the total area, according to a July 17 report from Cepea, a University of Sao Paulo research group.

“New crop cup quality profile is definitely inferior to previous years,” Flavour Coffee said.

Dry weather is forecast through to July 23 in most coffee areas, Sao Paulo-based weather forecaster Somar Meteorologia said in a report e-mailed yesterday.

The “weather is definitely colder and the rains that happened Monday and Tuesday are gone,” Cazarini said. “I hope they don’t come back anytime soon.”

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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