Price differentials for Brazilian beans eased in Europe's cash coffee market on sluggish demand as roasters were reluctant to step in because of high prices, traders said. Brazil MTGB fine beans were quoted about 20 cents below ICE's New York September arabica contract on Friday, against 8 cents below in the previous week.
"We don't see strong demand in the market now. Roasters are quiet, they buy to cover their basic needs," one trader said. "Many were reluctant to buy because of high prices." Arabica futures on ICE were slightly lower on Friday, digesting Thursday's gains after coffee was buoyed by the stronger agricultural commodities complex, with September down 1.35 cents, or 0.7 percent, at $1.8760 per lb.
Forecasts for more rain in Brazil, the world's top producer, were supportive of arabica prices. Rains have slowed the harvest of Brazil's coffee crop and spoiled the quality of the country's prized natural arabicas, but weekend frost spared trees from damage.
"Prices at these levels will not trigger buying," another trader said. "We still don't know what the damage in Brazil will be." Traders said the continuing euro zone debt crisis weighed on demand as well. "It is very difficult to say which direction the market will go," a third trader said. Demand for robusta was not strong mostly because of the holiday season, traders said.
Robusta coffee futures on Liffe rallied on Thursday, with September settling up $81, or 3.8 percent, at $2,192 a tonne, the highest since May 31. "Sluggish demand for robusta is usual for this time of the year, but high prices additionally kept many away," one trader said. Coffee exports from Honduras, Central America's top producer, are expected to reach nearly 5 million 60-kg bags for the current 2011/12 harvesting season, up 29 percent on the previous cycle.