Brazil's Coffee Trades Limited On Soaring Prices

Brazil's coffee market saw few trades Thursday as buyers balked at soaring prices.
"It is very difficult for people to adjust to the new prices," an independent coffee broker in Rio de Janeiro told Dow Jones Newswires. The broker said transactions were rare Thursday.
"There are two main factors today, the walkout of truck drivers in Colombia and a smaller harvest in Mexico," said John Wolthers, a trader at Comexim in the Brazilian port city of Santos.
Colombian President Juan Manuel Santos said late Thursday he thinks the government is "near a solution" to a two-week-old truckers strike that has pinched coffee exports.
Wolthers termed trading "slow" as buyers face higher prices. Arabica coffee futures for March delivery on ICE settled 3.7% higher at a new 13 1/2-year high of $2.6735 a pound, with concerns about supply shortages persisting amid uncertainty about unresolved trucker strike in Colombia obstructing coffee deliveries or creating backlogs.
Brazil may have "very little" coffee available by midyear, when beans from the new crop start to enter the market, Wolthers said in a report to clients this week. The analysis is based on an estimate of total carryover of 30,066,210 sacks in Brazil on Jan. 1. Each bag is 60 kilograms, or 132 pounds.
The analysis assumes that the exports of green and soluble coffee will continue at a high level similar to sales abroad in January and that Brazil's domestic consumption continues at a rapid pace, Wolthers said.
Brazil exported 2.7 million bags of coffee in January. Brazilians will consume over 1 million more bags of coffee in 2011, breaking more records as the economy continues to boom, and Brazil is set to overtake the U.S. as the largest consumer by 2012, the Brazilian coffee roasters' association known as Abic said on Jan. 26.
Brazilian coffee consumption is set to rise 6% to a record 20.27 million 60-kilogram bags this year, according to Abic, despite sky-high prices for beans.
"For all in the trade, one must prepared for the possibility of still higher markets and the consequences that this may bring in relation to the financial strains imposed at all levels," Wolthers said in the report.
A poor harvest caused Mexico's coffee exports to decline 26% year on year during the first four months of the season, which began in October. Mexico's government says this crop cycle's harvest will be 5% larger than last year's, at 4.4 million bags. Agroindustrias Unidas de Mexico, though, the largest coffee exporter, isn't as optimistic, estimating 3.5 million bags will be produced this year. 

source: http://coffeeasean.org/details.asp?Object=5&news_ID=18236062

Dollar Drops Versus Euro on Speculation Fed Won't Increase Interest Rates

The dollar fell against the euro for the first week in almost a month as the Federal Reserve signaled its dissatisfaction with job growth, bolstering speculation it will be slow to increase interest rates.

The greenback dropped against most of its major peers as lower-than-forecast retail sales and a rise in jobless claims damped demand. The Swiss franc surged as investors sought safety amid Middle East turmoil, while the pound rose against the dollar and euro on speculation the Bank of England will raise interest rates. The U.S. economy grew faster in the last quarter of 2010 than first estimated, data next week may show.

“The Fed reiterated that they will maintain a high bar for rate raises,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “Diminished expectations for rate hikes have been U.S. dollar negative.”

The dollar fell 1 percent to $1.3693 per euro in New York, the first weekly loss since Jan. 21, from $1.3554 on Feb. 11. Europe’s shared currency rose a second week versus the yen, gaining 0.7 percent to 113.90 and touching 113.92, the strongest level since Jan. 27. The yen had its first five-day advance against the dollar since Jan. 28, gaining 0.3 percent to 83.18.

The euro gained yesterday against most major counterparts after a European Central Bank Executive Board member, Lorenzo Bini Smaghi, said policy makers may need to raise interest rates as global inflation pressures mount.

‘Degree of Accommodation’

“As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said in an interview with the daily newsletter Bloomberg Brief: Economics.

The ECB has held its benchmark interest rate at 1 percent since May 2009.

U.S. policy makers “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing,” the Federal Open Market Committee said in minutes of its Jan. 25-26 meeting, released Feb. 16. They were divided over whether further evidence of recovery would warrant slowing or reducing $600 billion in U.S. debt purchases to spur growth.

The central bank has left its key rate at zero to 0.25 percent since December 2008 to support the economy. Analysts forecast the rate will rise to 0.5 percent by year-end, according to the weighted average in a Bloomberg News survey.

The dollar had the biggest loss this week, 1.4 percent, among 10 developed-nation currencies in the Bloomberg Correlation-Weighted Currency Indexes.

Krone, Franc Gain

Norway’s krone, a currency linked to oil exports, and the Swiss franc, considered a haven currency, gained the most, the indexes showed. They rose 2.1 percent and 1.9 percent as unrest surged in the Mideast and oil prices climbed.

Egyptian state television said yesterday Iran won permission to sail two naval ships through the Suez Canal in a move Israel called a “provocation.”

“The warships can increase tensions potentially between Iran and Israel, and since Israel is one of the U.S.’s closest strategic allies, that can weigh on the dollar,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network.

Crude oil for March delivery increased 0.7 percent, the most in five weeks, to $86.20 a barrel in New York on concern supplies may be disrupted.

The franc gained for the week versus 15 of its 16 most- traded peers. It rose 3 percent, the most since Dec.3, to 94.46 centimes per dollar and was up 1.9 percent to 1.2935 per euro.

Top Performer

Norway’s krone was No. 1, climbing 3.2 percent to 5.6684 per dollar and touching 5.6654, the strongest in 13 months. It appreciated 2.2 percent to 7.7609 to the euro.

The 17-nation currency rose against the greenback on Feb. 17 as Labor Department data showed applications for unemployment benefits rose to 410,000 in the week ended Feb. 12, exceeding the 400,000 median forecast in a Bloomberg survey.

Retail purchases in the U.S. rose 0.3 percent last month, Commerce Department data showed on Feb. 15, the least since a drop in June. A Bloomberg survey forecast a 0.5 percent gain.

The U.S. economy expanded at a 3.3 percent annual rate from October through December, according to the median estimate in a Bloomberg survey before Commerce Department data due Feb. 25. The rate was estimated in January at 3.2 percent. It was 2.6 percent in the third quarter and 1.7 percent in the second.

Yields Fall

The yen strengthened versus the dollar this week as investors sought the safety of U.S. Treasuries, driving yields down and dimming the attraction of dollar-denominated assets. Yields on U.S. two-year notes decreased nine basis points, the most since the five days ended Sept. 17, to 0.75 percent.

Sterling climbed as pressure increased on the Bank of England to raise its key rate from a record low of 0.5 percent. A Feb. 15 report showed inflation accelerated to double the central bank’s 2 percent target. Bank Governor Mervyn King said the next day inflation will peak this year and ease in 2012. The pound strengthened 1.5 percent to $1.6253.

“Most commentators are at least mildly bullish on the pound,” said John McCarthy, director of currency trading at ING Groep NV in New York. “I’m not sure if it’s justified, because it’s based on rate expectations and King moderated that.”

China’s yuan reached a 17-year high versus the dollar on speculation the nation will allow faster appreciation to tackle inflation and appease trading partners who say it’s undervalued.

The yuan gained 0.21 percent to 6.5732 per dollar as Group of 20 finance ministers and central bankers opened a summit in Paris yesterday in an effort to agree on a common approach to

Source: http://www.bloomberg.com/news/2011-02-19/dollar-drops-versus-euro-on-speculation-fed-won-t-increase-interest-rates.htmlglobal economic imbalances.

Shift north helps Brazil cut coffee harvest swings

It is not just the cycle of "on" and "off" years of coffee production that Brazil may be getting to grips with, but the risk of hefty bean losses to subzero temperatures too.
Global warming may have played a part in the waning danger that frost has posed to Brazil's coffee crops, the world's biggest, in the last decade, sector expert Carlos Brando said.
However, a shift north by farmers to warmer climes has worked in staving off the threat too, with Brazil now going some 15 years without major freeze damage.
"The major crop losses shown in the mid-1970s and 1990s are less likely to occur," Mr Brando, at Brazil-based P&A Marketing,said.
Brazil's production of arabica beans plunged by 60% to 9,000 bags in the frost-hit 1976-77 season, sending New York futures above 330 cents a pound.
Zero-crop harvesting
The migration in coffee plantations has further raised prospects of a less volatile outlook for Brazilian coffee output, which even without weather setbacks has historically alternated between high and low production years.
Besides the greater use of washing in processing beans - a practice which sees trees stripped earlier of cherries so increasing the recovery period - the cycle is also being reduced by the greater use of irrigation.
Watering helps trees "to recover faster and better from the stress of bearing a large crop", Mr Brando said.
The spread of so-called "zero-crop" harvesting, in which trees are pruned to produce beans only in the "off" year when prices are usually higher, has also dampened the cycle.
Deficit ahead
Brazil faces an "off" season in 2011-12, although official forecasters have predicted a crop of 41.9m-44.7m bags, higher than that in many "on" years.
Nonetheless, information group CoffeeNetwork on Friday forecast that world coffee production would, at 131m bags, fall 4m bags behind consumption.
Arabica beans, the main variety produced in Brazil, would account for 3m bags of this deficit, CoffeeNetworkforecast.
source : http://coffeeasean.org/details.asp?Object=5&News_ID=17235131

Vietnam coffee output up 6 pct in main area-report

Vietnam's 2010/2011 coffee crop harvest produced 403,600 tonnes in the country's largest growing province of Daklak, up around 6 percent from a year earlier, a state-run newspaper reported on Friday.

The output, following an International Coffee Organization's upward revision of Vietnam's crop output , could help partially meet increasing demand by roasters who sought to buy the cheaper variety after a surge in arabica prices.

Daklak has 177,000 hectares (437,000 acres) of coffee under production, with an average yield of 2.28 tonne per hectare, the official Vietnam News Agency-run Tin Tuc (News) daily said, citing provincial agricultural department data.

The output estimate confirmed a forecast in September 2010, when Deputy Director Nguyen Van Sinh at the department told Reuters that output from the crop would rise to 400,000 tonnes.

Daklak, with a total of 182,400 hectares of coffee under plantation, produces around one third of the output from Vietnam, the world's second-largest producer after Brazil. The country's output makes up 13 percent of global coffee output.

Daklak's harvest, hit by rains last November , ended late last month, or two weeks earlier than usual as farmers tried to cut costs and protect cherries from thieves due to high prices.

Global prices surged 57 percent last year, while robusta prices in Vietnam jumped 56.5 percent.

The news report confirmed adverse weather had affected Daklak's coffee production, but the higher output was reached as more trees have became productive, from 175,000 hectares in the previous 2009/2010 crop.

Vietnam's coffee crop year lasts between October and September.

Farmers in Daklak and in four other provinces which form the Central Highlands coffee belt are due to feed trees with fertiliser and water them from next month until early May when the rainy season returns under the 2011/2012 production cycle.

Coffee trading in Vietnam is likely to remain lacklustre until a holiday next month, as slow sales by farmers and bank credit limits stop exporters buying, traders said on Tuesday. 

source: http://www.vnbusinessreg.com/vietnam-coffee-output-6-pct-main-area-report/

UPDATE: SOFTS-Robusta coffee hits 2-1/2 year high, demand strong:

* Consumption growth triggers robusta coffee deficit

* Cocoa supported by turmoil in top grower Ivory Coast

* Sugar market awaits news on Indian exports

(Updates throughout, adds comment)

LONDON, Feb 21 (Reuters) - Robusta coffee futures climbed to a fresh 2-1/2 year high on Monday as the market retained its strong upward momentum, dealers said.

Cocoa futures on Liffe rose to 7-month high as the market eyed the deepening crisis in top grower Ivory Coast. White sugar eased slightly as physical demand remained slow following the recent run-up in prices.

ICE markets were shut on Monday for U.S. Presidents' Day.

"There's a lot of positive sentiment towards the coffee market," Andrea Thompson, analyst at CoffeeNetwork said, noting consumption growth was pushing the robusta market into deficit.

May robusta coffee stood $33 or 1.4 percent higher at $2,370 a tonne at 1256 GMT. It had earlier peaked at $2,372, the highest level for the second month since July 2008.

The advance in coffee has been led by ICE arabica futures which gained 7.1 percent last week and rose to the highest levels since May 1997, boosted by tight supplies following several below-par harvests in key producer Colombia.

High arabica prices have encouraged roasters to increase the volume of cheaper robusta beans in blends where possible.

"2010-11 should have been the third consecutive global surplus for robusta but it's now looking at a deficit. The Vietnam crop is fairly stable, it's really more the consumption growth (driving the deficit)," Thompson said.

Vietnam is the world's top producer of robusta coffee.

Brazil, the world's biggest coffee producer, is holding back its big bean stocks and hoping for improved market conditions in a wager that world prices will keep on rising, its top coffee official said on Friday.

CIVILIAN DEATHS

Cocoa futures rose as tensions in Ivory Coast showed no sign of easing, heightening concern about supply from the world's top grower.

Ivorian security forces killed at least three civilians when they opened fire to disperse gatherings in an Abidjan district on Sunday, and African leaders ended meetings to resolve a three-month post-election stand-off.

European Union sanctions and an export ban imposed by presidential claimant Alassane Ouattara have severely disrupted shipments of cocoa out of Ivory Coast.

"Restriction to flow of cocoa from the ports is no doubt having an effect with numbers ranging from 200-300,000 tonnes going nowhere, although allegedly smuggling is taking place," a London-based broker said.

May cocoa on Liffe was up 17 pounds at 2,280 pounds a tonne after earlier touching 2,297 pounds, the highest level for the second month since July 2010.

White sugar futures were slightly lower on a slowdown in nearby demand while a decision from India on whether to export 500,000 tonnes under Open General License (OGL) continued to be keenly awaited.

"Pressure this morning on whites may be a reflection of this (possible Indian exports), although we hear of no firm decision being taken," Sucden Financial said in a market note on Monday.

May whites fell a marginal $0.80 to $719.80 a tonne with prices now far below a record peak for the front month of $857.00 set on Feb. 2.

Dealers said a major short-term focus was the expiry of March raw sugar futures on ICE on February 28.

"End users may perhaps be awaiting the March expiry before acting, maybe hoping for a further breakdown in values," Sucden Financial said.

 SOURCE: http://www.futurespros.com/news/softs-news/softs-robusta-coffee-hits-2-1-2-year-high,-demand-strong-1000007802

Rising commodity prices threaten stability in Latin America, Asia and Africa

Rising commodity prices are worrying governments around the world as they fear food riots could erupt again - much like they did in 2008. The United Nations reported that countries in Latin America and Africa are most at risk for food riots as the prices climb.

Protests in the Middle East and North Africa in recent week were partly fueled by the rise in food prices, which the UN said reached record levels in January. Robert Zoellick, the president of the World Bank, said in a speech Tuesday that food prices are increasing to "dangerous levels and threaten tens of millions of poor people" around the world.

The UN Food and Agriculture Organization identified countries around the world that are most sensitive to surging food prices, affirming "the low-income food deficit countries are on the front line of the current surge in world prices." Among other countries, governments face the "major burden" of higher food prices in Uganda, Mali, Niger, Somalia, Kyrgyzstan, Honduras and Haiti, the UN concluded in a report.

Inclement weather around the globe and simple supply and demand fundamentals have coalesced to drive commodity prices to near record levels over the past year. The World Bank estimates that mounting prices have pushed 44 million people into "extreme" poverty in developing countries since June. 

SOURCE: http://www.ccstrade.com/futures-news/grains/story/rising-commodity-prices-threaten-stability-in-latin-am-800412848/

Tea, coffee farmers smell record profits in 2011

Kenya’s tea and coffee growers are upbeat that last year’s record output will be sustained in 2011 on the back of favourable weather, as well as continued recovery in the global economy.

However, dry weather could cut production.

Last year’s tea output and export earnings attained record levels, posting 399 million kgs and Ksh97 billion shillings ($1.2 billion) respectively.

This was a 27 per cent growth in output and 40 per cent in earnings.

“The market is still weighing the favourable factors to see if they can sustain growth,” said Sicily Kariuki, the Tea Board of Kenya managing director, while expressing confidence that there will be no fresh shocks that could hurt tea earnings and output.

Ms Kariuki said Kenya is still attracting the emerging middle class among Asian countries to its tea, especially in India and China, two of the largest tea producers.

“In 2010, India increased its buying by an impressive 46 per cent, an interesting development since we have not marketed our tea in that country,” she said.

The Coffee Board of Kenya on the other hand, has lowered earlier projections that the commodity would rise by 28 per cent to 51,000 tonnes, from 40,000 tonnes.

The Board now predicts that volumes could dip by a similar percentage due to drought, although total value is expected to stay high.

The current production is a pale shadow of the peak of 129,926 tonnes in 1987-88.

Reports from the growing zones, however, indicate that the sector is headed back to 1980 levels when it acquired the nickname black gold.

“The prices are high and we expect better prices in the coming seasons,” said Loise Njeru, managing director of the Coffee Board of Kenya. Income from coffee exports will rise by 7 per cent this year to Ksh16 billion ($197 million) as higher prices offset lower production, the board said.

“Going forward, commodity prices are expected to rise a supported by the strength of global demand, especially from emerging economies,” said the IMF, adding that the rise will be steepest in oil and metals prices.

While the latest import data shows that consumption of coffee in importing countries picked up strongly in 2010, after a weak first quarter, especially in the European Union, the Economic Intelligence Unit continues to take a fairly gloomy view of demand growth.

Growth in demand will be constrained by increases in retail and coffee bar prices in response to higher wholesale costs (particularly for the popular mild arabica variety), as well as by renewed concern about the EU debt crisis and the outlook for the euro.

Kenya’s benchmark coffee grade AA surged as much as 40 per cent at the first auction of 2011 as buyers replenished their stocks after a five-week break, the Nairobi Coffee Exchange said.

The top AA grade sold for as much as $1,008 per 50-kilogramme bag, compared with $721 at the previous sale.

The International Coffee Organisation has projected that prices will remain high for many years, which offers developing countries like Kenya an opportunity to increase production.

By CATHERINE RIUNGU, The East African

source:
http://in2eastafrica.net/tea-coffee-farmers-smell-record-profits-in-2011/