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Brazil’s Arabica Coffee Discount Widens as New York Futures Rise

Buyers of coffee from Brazil, the world’s largest producer, were getting a bigger discount for arabica beans this week, with futures in New York rallying, according to Flavour Coffee and Cazarini Trading Co.

Fine-cup beans were trading at a discount of 10 cents a pound to the price of the December contract on ICE Futures U.S. in New York, compared with 6 cents a pound last week, data from Rio de Janeiro-based broker Flavour Coffee showed. Good-cup quality beans were at a discount of 20 cents a pound up from 16 cents a pound last week, it said in a report e-mailed yesterday.

Arabica coffee futures rallied 11 percent this week as some investors bought the futures after betting on a price drop for six weeks, U.S. Commodity Futures Trading Commission data compiled by Bloomberg showed. The price dropped 20 percent this year as certified stockpiles surpassed 2 million bags, the highest since August 2010. Fine-cup quality beans are usually more expensive than good-cup ones because of the taste profile.

“Funds are still short covering and better news on the macro scenario started the happy mood in coffee, other commodities and stock exchanges,” Thiago Cazarini, a broker at Cazarini Trading Co. in Varginha, Brazil, said in a separate report e-mailed yesterday. “Even though prices rallied that much, differentials only softened 2 cents to 3 cents.”

Short covering denotes purchases to close bets on lower prices. Differentials refer to a discount or a premium paid to obtain physical coffee in relation to the futures prices. The discount for fine-cup beans did not widen enough to attract more demand, Flavour Coffee said in the report.

In the domestic market, sales volume was “big,” Flavour Coffee said, adding that producers didn’t miss “the opportunity to sell coffees at more attractive prices in Brazilian reais.”

Robusta Premium

Buyers of conillons, as Brazilian robusta beans are known, are paying a premium of 15 cents a pound ($330 a metric ton) to the price on the NYSE Liffe exchange in London, up from 14 cents a pound last week, according to Flavour Coffee data.

“With the huge premium against Liffe, the market is neglected to a very sporadic short-coverage,” Flavour Coffee said. Robusta futures rose 2.4 percent this week.

Robusta coffee for November delivery rose 0.8 percent to $2,098 a metric ton by 10:37 a.m. on NYSE Liffe. Arabica coffee for December delivery was up 1.4 percent to $1.814 a pound on ICE.

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