Brazil's government will announce a financial support by August for coffee farmers in the world's top grower, as the 2008/09 harvest slowly gathers pace, the National Coffee Council (CNC) said late on Thursday.
The measures will include a renewal of the Pepro subsidy scheme through which the government pays growers a subsidy when they sell their coffee within a certain price range, CNC President Gilson Ximenes told Reuters.
"The government is consulting, checking with everyone. I think that in the month of August everything will be fine. Beyond the Pepro, they want to launch some more measures to give stronger support to the market," he said. "Options, long-term financing, it's because of these that it's taking a while (to set the Pepro) because it will all be put into one package," he added.
The agriculture ministry may also organize auctions of public contract options for a volume of 2 million 60-kg bags, which would revive a long-defunct system of government purchases of physical coffee, Ximenes said.
Those government stocks, some of which were harvested as long ago as the early 1980s, are still being sold off, trickling on to the market periodically at auctions. As well as options, the government package will include financing for growers that would enable them to defer sales of their coffee in order to obtain a better price.
"The decision is that there will be a Pepro and by the month of August, everything will be established," Ximenes said, noting that neither the reference price nor amount of the premium have been set. Ximenes said the reference price would need to be increased from 300 reais per bag last year since costs were up this year.
"We need to put the price up because at no one is happy with these rates ... (The agriculture minister) can't launch a Pepro with 260 reais, it needs to be a Pepro of 300 reais at least," he said. The Pepro subsidy is paid to the producer enabling him to sell his coffee at the reference price less the value of the subsidy.