Brazilian Exporters Seek Better Deal in Slumping Arabica Market

Brazilian exporters plan to petition the world’s largest commodities exchange group for arabica coffee, the IntercontinentalExchange (ICE), to get a better deal for their beans.

According to sources in a Wall Street Journal report, the Council of Brazilian Coffee Exporters (CeCafe) plans to ask the ICE to reduce a 9-cents-per-pound discount that has been applied to Brazilian arabica futures since the country’s beans were given right to trade on the exchange in 2010. Here’s more from that report:

That means that the owner of that physical coffee would receive 9 cents less per pound than the contracted price reflected on the exchange. With one contract representing 37,500 pounds of coffee beans, that difference adds up to $3,375.

Brazilian growers’ battle for inclusion pitted them against critics, including growers groups from other Latin American nations, which argued that coffee from Brazil was of lower quality than the hand-picked, highland-grown beans from other parts of the region. Industry officials say the exchange set the 9-cent discount, the largest discount in the ICE system, in response to the concerns over quality.

The petition threat comes as arabica futures on the exchange are hitting a two-month low, in part because of an over-supply of Brazilian beans. Brazil remains the largest coffee exporter in the world. Here’s the latest on ICE coffee futures from Bloomberg:

July Arabica coffee dropped 1.7% to $1.3285 a pound at 11:04 a.m. on ICE Futures U.S. in New York. The price saw its sixth straight decline, the longest slide since March 19. Earlier, the commodity touched $1.3275, the lowest for a most-active contract since April 29. A bag weighs 60 kilograms, or 132 pounds.

For the year beginning July 1, Brazil’s exports are expected to be up nearly six percent over last year, but a leftover supplies from last year are affecting futures.