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Coffee Rises as Brazil Subsidies May Curb Supply; Cocoa Rallies

July 11 (Bloomberg) -- 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. Cocoa also gained.

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 33 percent in the past 12 months 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 for September delivery rose 1.4 percent to close at $1.234 a pound at 2 p.m. on ICE Futures U.S. in New York. Prices dropped 1.5 percent in the previous two sessions.

Workers at Brazil’s 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 futures for September delivery advanced 2.8 percent to settle at $2,239 a metric ton on ICE, the biggest gain since April 8.

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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