Coffee prices are confounding

SAO PAULO, Aug 26, 2010 (Dow Jones Commodities News via Comtex) — Volatile international and local coffee prices are confounding buyers and sellers in Brazil this week. December coffee on ICE Futures U.S., the most active contract, soared 5.80 cents, or 3.5%, to $1.7240 on Thursday as funds renewed buying after the market had plunged 12.4% this week. Coffee prices has been moving very fast and it is difficult for many roasters abroad to react quickly to the volatility, said John Wolthers, a trader at coffee exporter Comexim in Santos, a Brazilian port city that is a key juncture in the export trade. In Brazil–the world’s top coffee producer–bean prices are attractive for the producers, but roasters are cautious of paying the high prices or premiums, Wolthers said. In Brazil’s spot market, good-quality arabica coffee, which allows for defects in some of the beans, was trading at between 315 Brazilian reals ($179) and BRL320 per 60-kilogram bag on Thursday. This compared to BRL310 per bag on Wednesday. Despite the arrival on the market of a new coffee crop from Brazil–with 2010 to 2011 set to be a high production year in the biennial arabica cycle–short-term supply problems continue to stimulate a drawing down of world stocks. The International Coffee Organization said that the bumper crop of 54.6 million bags being harvested in Brazil, will be just enough to meet demand. But world coffee prices will likely remain firm due to tight nearby supplies, Nestor Osorio, ICO executive director said. These are certainly strange times for coffee buyers and sellers alike. A trader at export company Swiss Coffee House in Santos said that buyers and sellers in Brazil never imagined that prices would rise this high with Brazil expecting a bumper coffee crop. Nobody knows in which direction prices will go, so people are cautious, he said. Moreover, although producers in Brazil have managed to sell small volumes of coffee on Thursday as prices rose, they often struggled to agree on the price or premiums with buyers, the trader said. For instance, discounts for a good quality arabica coffee Thursday saw sellers looking for 22-25 points under the December contract on ICE. Buyers, however, wanted to pay 28-30 points under the same contract. With a large spread like this, getting an agreement is difficult, he said.

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