By Carlos Caminada
Bloomberg
June 1, 2007
Brazil, the world's biggest coffee producer, will give arabica growers a subsidy of as much as 40 reais ($21) a bag after a rally in the local currency eroded export profits.
The government will guarantee that growers receive 300 reais per 60-kilogram bag of arabica coffee, the Agriculture Ministry said in a statement. Brazil will hold auctions twice a month between growers and buyers and plans to subsidize as many as 5 million bags through the end of the harvest in October.
Brazil's offer to support prices, its first since 2002, comes one day after Colombia, the world's second-biggest arabica producer, said it would aid farmers to counter a currency rally. Colombia's peso and Brazil's real are the world's best- performing currencies against the dollar in the past six months.
``Producer profits are really narrow because of the exchange rate,'' said Joao Antonio Lian, head of Sumatra Cafes Brasil, Brazil's third-biggest coffee exporter. ``Some growers are going broke.''
Arabica futures jumped 5.5 cents, or 4.9 percent, to $1.174 a pound on the New York Board of Trade, the highest closing price since Feb. 28 and the biggest one-day gain for the most- active contract since April 12. Before today, coffee had dropped 10 percent in the previous six months.
The Brazilian real has risen 14 percent against the dollar in six months, and the Colombian peso has jumped 22 percent. Over the past three years, the real has surged 65 percent and the peso has soared 45 percent.
Colombian Subsidies
Colombia said yesterday it will give farmers 10,000 pesos ($5.30) for every 125 kilograms of coffee if the price of the load falls below 386,000 pesos, and another 10,000 pesos a load if the price drops to less than 376,000 pesos. Coffee sells for about 400,000 pesos for a 125-kilogram load now.
Domestic prices in Brazil and Colombia generally move in line with dollar-denominated coffee futures in New York. If the dollar depreciates or international prices fall, the value of coffee in local-currency terms usually declines as well.
Brazil won't give its subsidy to farmers who offer to sell coffee to exporters or roasters for less than 260 reais a bag. Brazil said it's trying to force a price increase by setting a floor for the first time in such auctions.
Domestic Prices
The average price of arabica coffee was 231 reais yesterday in the south of Minas Gerais, Brazil's biggest coffee-producing state, according to the University of Sao Paulo's agricultural commodities research unit. That was 20 percent less than the 288-real price at the start of the year.
``The market price is below production costs,'' Lucas Tadeu Ferreira, director of the Agriculture Ministry's coffee department, said in an interview from Brasilia. ``We want to ensure some profitability to the entire coffee production chain.''
Ferreira said the ministry doesn't plan to implement any other price-support policies this year. In March, the ministry said it was considering holding auctions of options contracts to protect growers from price drops. After several meetings last month, his team decided for the subsidy, he said.
The country's coffee output, including robusta beans, will fall to 32.1 million bags this season from 42.5 million in the previous season after trees entered the slower half of a two- year cycle and drought hindered flowering, the Agriculture Ministry said in April. Most growers of arabica coffee start harvesting this month, while robusta producers started in May.
Stockpiles
Brazilian stockpiles of the beans almost doubled at the end of the first quarter after growers harvested the biggest crop in four years last season. Inventories kept by growers and trading companies rose to 17.6 million bags on March 31, up from 9.72 million bags a year earlier, the Agriculture Ministry said yesterday.
Coffee exports from Brazil rose less than 0.1 percent in May from a month earlier, Brazil's Coffee Exporters Council said today in a preliminary report on its Web site. The country's exporters shipped 1.875 million bags of green coffee beans last month, compared with 1.874 million bags in April.
In Colombia, coffee production will rise to 12.6 million bags this year, from 12 million bags in 2006, Gabriel Silva, general manager of the National Federation of Coffee Growers, said yesterday in Bogota.
About 70 percent of Brazil's output is of arabica beans and the other 30 percent robusta. Colombia only produces arabica.
To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net
Bloomberg
June 1, 2007
Brazil, the world's biggest coffee producer, will give arabica growers a subsidy of as much as 40 reais ($21) a bag after a rally in the local currency eroded export profits.
The government will guarantee that growers receive 300 reais per 60-kilogram bag of arabica coffee, the Agriculture Ministry said in a statement. Brazil will hold auctions twice a month between growers and buyers and plans to subsidize as many as 5 million bags through the end of the harvest in October.
Brazil's offer to support prices, its first since 2002, comes one day after Colombia, the world's second-biggest arabica producer, said it would aid farmers to counter a currency rally. Colombia's peso and Brazil's real are the world's best- performing currencies against the dollar in the past six months.
``Producer profits are really narrow because of the exchange rate,'' said Joao Antonio Lian, head of Sumatra Cafes Brasil, Brazil's third-biggest coffee exporter. ``Some growers are going broke.''
Arabica futures jumped 5.5 cents, or 4.9 percent, to $1.174 a pound on the New York Board of Trade, the highest closing price since Feb. 28 and the biggest one-day gain for the most- active contract since April 12. Before today, coffee had dropped 10 percent in the previous six months.
The Brazilian real has risen 14 percent against the dollar in six months, and the Colombian peso has jumped 22 percent. Over the past three years, the real has surged 65 percent and the peso has soared 45 percent.
Colombian Subsidies
Colombia said yesterday it will give farmers 10,000 pesos ($5.30) for every 125 kilograms of coffee if the price of the load falls below 386,000 pesos, and another 10,000 pesos a load if the price drops to less than 376,000 pesos. Coffee sells for about 400,000 pesos for a 125-kilogram load now.
Domestic prices in Brazil and Colombia generally move in line with dollar-denominated coffee futures in New York. If the dollar depreciates or international prices fall, the value of coffee in local-currency terms usually declines as well.
Brazil won't give its subsidy to farmers who offer to sell coffee to exporters or roasters for less than 260 reais a bag. Brazil said it's trying to force a price increase by setting a floor for the first time in such auctions.
Domestic Prices
The average price of arabica coffee was 231 reais yesterday in the south of Minas Gerais, Brazil's biggest coffee-producing state, according to the University of Sao Paulo's agricultural commodities research unit. That was 20 percent less than the 288-real price at the start of the year.
``The market price is below production costs,'' Lucas Tadeu Ferreira, director of the Agriculture Ministry's coffee department, said in an interview from Brasilia. ``We want to ensure some profitability to the entire coffee production chain.''
Ferreira said the ministry doesn't plan to implement any other price-support policies this year. In March, the ministry said it was considering holding auctions of options contracts to protect growers from price drops. After several meetings last month, his team decided for the subsidy, he said.
The country's coffee output, including robusta beans, will fall to 32.1 million bags this season from 42.5 million in the previous season after trees entered the slower half of a two- year cycle and drought hindered flowering, the Agriculture Ministry said in April. Most growers of arabica coffee start harvesting this month, while robusta producers started in May.
Stockpiles
Brazilian stockpiles of the beans almost doubled at the end of the first quarter after growers harvested the biggest crop in four years last season. Inventories kept by growers and trading companies rose to 17.6 million bags on March 31, up from 9.72 million bags a year earlier, the Agriculture Ministry said yesterday.
Coffee exports from Brazil rose less than 0.1 percent in May from a month earlier, Brazil's Coffee Exporters Council said today in a preliminary report on its Web site. The country's exporters shipped 1.875 million bags of green coffee beans last month, compared with 1.874 million bags in April.
In Colombia, coffee production will rise to 12.6 million bags this year, from 12 million bags in 2006, Gabriel Silva, general manager of the National Federation of Coffee Growers, said yesterday in Bogota.
About 70 percent of Brazil's output is of arabica beans and the other 30 percent robusta. Colombia only produces arabica.
To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net
Comments
Post a Comment
Join the conversation