Brazil to Buy Coffee Above Market Price Through Option Contracts

Brazil, the world’s biggest coffee producer and exporter, will offer to buy as many as 3 million bags of the commodity at above-market prices through options contracts to aid growers as futures trade near a four-year low.

The government will offer to pay 343 reais ($149) a 60-kilogram bag through the contracts and will also purchase coffee directly from growers to build it’s stockpiles, President Dilma Rousseff said in a radio interview from Minas Gerais, the country’s biggest coffee-producing state. That compares with an average prices of 283.53 reais a bag yesterday, according to the University of Sao Paulo’s Cepea agricultural research agency.

The announcement, which was delayed several times this year, comes as Brazilian coffee growers say they are selling their crops below costs after record harvests led international prices to slump. Arabica-coffee futures in New York touched $1.1535 a pound on Aug. 1, the lowest since July 2009.

The plan will amount to 5.8 billion reais, including 1.14 billion reais to fund stockpiles, the National Coffee Council, known as CNC, said in an e-mailed statement. Brazil will spend up to 1.04 billion reais with the coffee options, the CNC said.

Details of the plan will be announced later today, the Agriculture Ministry said in response to questions, declining to provide more information before the release.

To contact the reporter on this story: Anna Edgerton in Brasilia at aedgerton@bloomberg.net

To contact the editor responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net

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