Coffee Rises as Brazil Subsidies May Curb Supply; Cotton Rallies

Arabica coffee rose for the first time in three days as Brazil, the world’s largest producer, negotiates farmer subsidies that will limit sales of surplus beans. Cotton and cocoa also gained, and orange juice fell.

Brazilian officials met with coffee growers yesterday to seek an agreement on 390 million reais ($172 million) in subsidies. The government may buy coffee in public auctions, sell options contracts or use the so-called Pepro subsidies, where growers are paid the difference between market prices and the established minimum price of 307 reais per 60-kilogram bag. Futures tumbled 34 percent in the 12 months through yesterday and a plunge in the real against the dollar is encouraging exports that may push prices down further.

“This is the same program Brazil has used successfully before,” Jack Scoville, a vice president at Price Futures Group Inc. in Chicago, said in a telephone interview. “It supports the market and is good for everyone involved.”

Arabica-coffee futures for September delivery rose 2.2 percent to $1.243 a pound at 11:19 a.m. on ICE Futures U.S. in New York, erasing the 1.5 percent loss during the previous two sessions. Prices dropped 15 percent this year through yesterday.

Workers at Santos, the largest port in South America, began a strike yesterday and won’t be at work today as part of a nationwide walkout with other industrial unions. The strike prevented about 13 container ships from being loaded.

“The Brazilian strike is creating concern that shipments will be delayed,” Rodrigo Costa, a trading director at Caturra Coffee Corp., said in a telephone interview.

Cocoa, Cotton

Cocoa futures for September delivery gained 2.1 percent to $2,224 a metric ton on ICE, heading for the biggest gain since July 3.

Cotton futures for December delivery rose 0.1 percent to 86.92 cents a pound in New York, after reaching 87.11 cents, the highest for a most-active contract since June 19.

Orange-juice futures for September delivery fell 0.8 percent to $1.344 a pound on ICE, heading for a second straight decline after and eight-session rally. Prices rose 15 percent this year through yesterday.

The U.S. Department of Agriculture will update its estimates of Florida’s orange crop and the U.S. cotton harvest at noon today in Washington.

To contact the reporter on this story: Marley DelDuchetto Kayden in Chicago at mdelduchett2@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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