The premium of coffee grown in Mexico and stored in US warehouses has tumbled to a 10-month low as exporters there clear out their stocks to make room for the new crop being harvested, US importers said on Thursday. "They're trying to get rid of what they have to make room for their new crop," one importer said. The premium for Mexican high grown coffee fell to an average of 13.5 cents over the March arabica futures contract on ICE Futures US, the lowest since late January. This compares with 19.5 cents one week prior.
Coffee on the physical market trades at either a premium or a discount to the benchmark futures price on ICE Futures US on Thursday, March futures tumbled 5.2 percent to $1.8885 per lb, bringing the average immediately available US spot Mexican high grown price to $2.0235 per lb from $2.1265 a week ago. Mexican coffee has been a rare commodity this year after the country's 2013/14 production was hampered by a leaf rust fungus known as roya. Tight supplies lifted its premium to 30 cents over in May, the highest since at least 2005, which is as far back as Reuters data goes.
Earlier this month, Mexico's national coffee association AMECAFE said its 2014/15 (October/September) output will be flat to lower. This comes after the country produced an estimated 3.9 million 60-kg bags in 2013/14, International Coffee Organisation data showed, a 10 percent drop from the year prior. In May, the US Department of Agriculture issued an attache report, which is not official USDA data, forecasting that Mexico will produce 3.9 million bags in 2014/15.
Even more rare this year is coffee from El Salvador, a small Central American producer that was the hardest hit by the roya outbreak in the region, the worst in the region's history. On Thursday, one US importer reported selling spot El Salvador strictly high grown arabica at an average premium of 19.5 cents, also the lowest since late January. This comes after importers who spoke to Reuters throughout 2014 reported being unable to buy this bean for the past five months due to its scarcity.
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