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Brazil's Arabica Discount Narrows as ICE Futures Slide

Oct. 12 (Bloomberg) -- Buyers of arabica coffee from Brazil, the world’s largest producer, are getting a smaller discount after futures retreated this week, according to brokers Flavour Coffee and Cazarini Trading Co.

Fine-cup quality beans were trading at a discount of 8 cents a pound to the price on ICE Futures U.S. in New York, Flavour Coffee said in a report e-mailed yesterday. That compares with 13 cents a pound last week. Good-cup quality coffee was at a discount of 17 cents a pound from 21 cents a pound last week, data from the broker showed. Fine-cup beans are usually more expensive because of their taste profile.

“Brazil differentials started tightening again,” Thiago Cazarini, a broker at Cazarini Trading in Varginha, Brazil, said in a report e-mailed yesterday, referring to the discount or a premium paid to obtain physical coffee in relation to the price on the futures market. “Most of the buyers also stayed side-lined” with few transactions reported, he said.

Arabica coffee futures slid 4.4 percent over the past week as coffee trees in Brazil started to flower before the 2013-14 crop. Rains that reached Brazil’s growing areas yesterday and will last throughout the weekend will help to ensure that the buds don’t abort, favoring a good crop next year.

“The market has lost a lot with good volumes of rains and flowering in Brazil,” Cazarini said. “Uncertainty of a good weather pattern for next year’s production is gone.”

Cold Front

A cold front that is moving past the southeast of Brazil is bringing showers to the coffee belt, forecaster Somar Meteorologia in Sao Paulo said in a report e-mailed yesterday. The front will start to weaken on Oct. 14 while scattered showers will continue in the country’s coffee belt, Marcio Custodio, forecast operating director said. Another cold front is forecast for after Oct. 18, he said.

“These rains are most welcome as to help fixing the small buds soon after flowering,” Flavour Coffee said.

Conillons, as Brazilian robusta beans are known, were at a premium of 15 cents a pound ($331 a metric ton) to the price on the NYSE Liffe exchange in London, down from 20 cents a pound last week, according to Flavour Coffee data.

“Offers remain with high premiums over Liffe, attracting no buyers at all,” Flavour Coffee said.

Robusta coffee for November delivery was down 0.9 percent to $2,057 a ton by 11 a.m. in London. Arabica coffee for December delivery was unchanged at $1.6075 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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