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Coffee Rally Spurs Sales in Brazil as Arabica Discount Widens

A rally in New York coffee futures this week has sparked sales from Brazil, the world’s top producer, as the discount buyers get for their beans widened, according to brokers Flavour Coffee and Cazarini Trading Co.

Arabica coffee of good cup quality from Brazil was trading 21 cents to 22 cents a pound below the price on ICE Futures U.S., Rio de Janeiro-based Flavour Coffee said in a report e- mailed yesterday. That compares with a discount of 18 cents to 19 cents last week, data from the broker showed. More sales were concluded this week, it said.

“During the rallies better differentials could be locked at two to three cents discount from last week depending on strings and volumes offered,” Thiago Cazarini, a broker at Cazarini Trading in Varginha, Brazil, said in a separate report also e-mailed yesterday. Differentials refer to a discount or a premium paid to obtain physical coffee in relation to the futures price.

Arabica coffee, the worst performing commodity in the Standtard & Poor’s GSCI gauge of 24 raw materials last year, gained as much as 2.3 percent yesterday on speculation output will decline in Central America due to the leaf rust disease. The beans rose 1.7 percent this week and 8.3 percent this year.

Lack of selling from Brazilian producers and concerns about Central American output “added fuel to prices,” Cazarini said.

Producers in Brazil slowed sales after last year’s price decline. Growers in the South American nation sold 60 percent of the 2012-13 crop by Dec. 31, down from 76 percent in the same period a year earlier, Gil Barabach, a market analyst at Safras & Mercado, said yesterday.

Quiet Market

The physical coffee market in Brazil is still “quiet” though “more businesses reported trading this week,” Flavour Coffee said. There have not many been forward sales, or purchases for future needs.

Arabica coffee of fine cup quality was trading at a discount of 10 cents a pound to the exchange price, unchanged from the previous week, Flavour Coffee data showed. Conillions, as Brazilian robusta beans are known, were at a premium of 15 cents a pound to the price on the NYSE Liffe exchange in London.

While arabica coffee is harvested mainly in Latin America and favored for specialty drinks such as those made by Starbucks Corp. (SBUX), robusta beans are grown mainly in Asia and parts of Africa and are used in instant coffee and espresso.

Arabica coffee for March delivery was 0.2 percent higher at $1.558 a pound by 5:28 a.m. in New York. Robusta coffee for March delivery fell 0.2 percent to $1,974 a ton in London.

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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