Brazil’s Arabica Coffee Discount Narrows as ICE Futures Tumble

Buyers of arabica coffee from Brazil, the world’s largest producer, are getting a smaller discount for their beans as sales slowed after futures tumbled.

Arabica of good-cup quality traded at a discount of 19 cents a pound to the price on the ICE Futures U.S. exchange in New York, according to Rio de Janeiro-based broker Flavour Coffee. That compared with a discount of 21 cents to 22 cents a pound a week earlier, data from the broker showed. Coffee futures tumbled 5.4 percent so far this week.

The drop in futures “has put exporters once again on a defensive side,” Flavour Coffee said yesterday in an e-mailed report. “The flow of both good-cup and fine-cup qualities slowed down considerably. Differentials tightened up by a couple of cents,” the broker said, referring to a discount or a premium paid to obtain physical coffee in relation to the futures price.

Coffee stockpiles in Brazil were 20 percent higher from a year earlier, according to Terra Forte Exportacao e Importacao de Cafe Ltda. Inventories stood at 28.4 million bags as of Jan. 1, up from 23.75 million bags in the same period a year earlier, said Jayme Leme Neto, an export manager at the Sao Joao da Boa Vista-based company. A bag of coffee weighs 132 pounds.

Coffee producers in Brazil slowed sales after futures prices dropped 37 percent last year, the most in more than a decade. The beans were the worst-performing commodity in the Standard & Poor’s GSCI index of raw materials. Brazil’s coffee exports dropped 16 percent in 2012 partly because producers held back beans, according to Cecafe, the country’s coffee exporters’ council.

Rising Futures

Growers in Brazil had started to sell after arabica coffee futures gained for five consecutive weeks through Jan. 18, Flavour Coffee and Cazarini Trading Co., a broker in Varginha, Brazil, said last week. The futures rose on speculation a disease that affects foliage would cut output in Central American nations.

“When the market was absorbing the good movements upside that could attract producer’s interests to sell coffee or at least break what seemed to be an endless boring start of the year, it made a U-turn, heading south,” Thiago Cazarini, a broker at Cazarini Trading, said in a separate report e-mailed yesterday. “Roasters are satisfied until March to April, and are only watching the market for May onwards.”

Arabica of fine-cup quality traded at a discount of 10 cents a pound to the exchange price, unchanged from the previous week, Flavour Coffee data showed. Fine-cup quality beans are more expensive because of their taste profile.

Conillons

Conillons, as Brazilian robusta coffee is known, traded at a premium of 15 cents a pound ($331 a metric ton) to the price on the NYSE Liffe exchange in London, also unchanged from the previous week, Flavour Coffee data showed. Robusta beans from the next crop were at a premium of 5 cents a pound for shipments in May and June, according to the broker.

“Buyers are still looking for discounts,” it said.

Robusta coffee for March delivery was down 0.5 percent to $1,936 a ton by 10:57 a.m. in London. Arabica coffee for March delivery was 0.9 percent higher at $1.479 a pound in New York.

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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