Brisk trade in Brazilian arabica took place in Europe's cash coffee market this week as a sharp rise in futures made producers more willing to sell, dealers said on Friday. "I think there were improved export offers from Brazil this week with the rise in futures shaking out more producer selling for both spot and deferred delivery," one trader said. "Roasters were also showing good purchase interest."
Price differentials softened to compensate for rising futures. Brazil MTGB fine beans for October onwards shipment were quoted around 10 cents under ICE's New York December arabica contract on Friday against 6 cents under in the previous week. Brazil Swedish quality beans were 20 cents under new York December against 16 cents under last week.
Sales offers from Brazil had been restrained in recent weeks as farmers and producers were dissatisfied with low futures. Brazil's August coffee shipments were down on the year. New York arabica coffee futures rose this week, supported by heavy speculative short-covering and trade buying. Prices hit seven-week highs on Friday as softs were swept up in the commodities rally following the Federal Reserve's aggressive new stimulus plan for the US economy.
"Brazilian differentials did soften as futures rose but were in a wide range later in the week," another trader said. "Brazilian farmers and co-operatives were evidently selling into the futures rally." The futures rise also prompted buying interest in some cheaper origins with low differentials, especially from Africa. "There was good European industry buying interest for Ethiopian beans with Djimmah Grade 5 still available at differentials well under Brazil at 23 cents under New York," a trader said.
Colombian differentials firmed slightly because of unfavourable weather as the new harvest started. Roasters expect a good crop following several disappointing harvests despite some reports of trouble. Colombia Excelso beans for September/December shipment were quoted on Friday at 11 cents over New York December against 10 cents over last week. "Buyers are still seeking Colombian differentials in single digits so I do not think a lot changed hands this week although the new crop is starting to flow," a trader said. "Unfavourable weather in the past week hardened selling levels."
New Central American harvests are also approaching. Traders said some selling was noted by Guatemala but producers in Honduras and Costa Rica were generally restrained. In robusta, differentials in top producer Vietnam weakened slightly as the new crop in the world's largest robusta exporter looms in October. Current crop Vietnam Grade 2 beans for September/October shipment were at $10 under London's November robusta contract against $10 over last week. Vietnam had been offered for sale at premiums over London in past weeks.