Coffee producers in Brazil, the world’s largest grower, are unlikely to make substantial deliveries to ICE Futures U.S. because the exchange will apply a discount to their beans, according to Volcafe.
ICE, where arabica coffee trades in New York, will start accepting delivery of Brazilian beans as of next March. A 9 cent-a-pound discount will apply to coffee from the South American nation, the biggest among origins accepted by the exchange, according to ICE’s website. The exchange began grading coffee from Brazil this month.
Brazilian coffee would have to sell in the physical market at a discount of 16 cents a pound or more to the exchange price for delivery to ICE to be profitable for sellers, Volcafe, a unit of ED&F Man Holdings Ltd., said in a report e-mailed today.
Beans from the 2012-13 crop now under way were trading at a discount of 5 cents a pound that’s already a “soft” price not seen since summer 2009, the Winterthur, Switzerland-based trader said. “So we have some way to go,” Volcafe said, adding that chances of large deliveries to the exchange were “fair to low.”
Beans from Colombia, the second-biggest arabica grower, were selling at the exchange price, while coffee from India to Ecuador incurred discounts of 2 cents to 4 cents a pound, depending on origin.