Differentials for Colombian coffee dropped to their lowest levels in two months this week ahead of an expected strong mid-crop harvest, further cementing the country's push to win back market share it had lost to Central American rivals. The average premium for usual good quality Colombian arabica beans over second-month July coffee prices on ICE Futures US fell to an average of 15 cents a lb ex dock in the past week, the lowest level since mid-February.
The drop came as differentials for other high-quality washed arabica beans, mainly from Central America, remained near their highest levels in months. This made Colombian beans a bargain for US roasters, who showed interest in Colombian coffee despite being relatively well-covered.
"Colombians are the best buy right now, for quality and price," said Jessica Sellers, vice president of trading at Serengeti Trading, a Dripping Springs, Texas-based importer. Roasters' eagerness for Colombian beans comes amid Colombia's push to offer beans at aggressive differentials in order to win back market share lost to Central American origins after poor weather and a leaf rust disease known as roya ravaged its crop in 2008 and 2009, leading to years of poor harvests.
Those Central American origins have since dealt with roya outbreaks of their own which have continued to damage crops into the 2014/15 growing season, driving Guatemalan hard bean premiums up to an average of 38 cents a lb and leaving El Salvadoran coffees all but unavailable.
"You don't need it. Just buy Colombians," one US trader said. Even Honduran strictly high grown coffee, which has competed neck-and-neck with Colombian coffee for much of the 2014/15 harvest, rose in the past week to an average of 16 cents a lb as the harvest winds down, traders said. By contrast, harvesting for Colombia's mid-crop, or mitaca, will pick up in the coming weeks, prompting significant activity in booking May shipments, traders said.
Trade in coffee from top-grower Brazil remained slow, with roasters well-covered and exporters uneager to sell as the real currency gained in value against the dollar, reducing their local currency returns. Traders reported offers as high as 2 cents a lb over futures prices on a free on board basis, roughly equivalent to 9 cents a lb over futures ex dock, though they noted business was not done at those high levels.
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