Brazil to lend cash to farmers for coffee futures

* Loans destined for option premiums, futures margin calls

* Funds would come from Funcafe subsidized credit system

* Margin payments on futures swell with coffee price rally

Brazil's government plans to begin offering loans to coffee farmers to cover the cost of using hedging instruments, including margin payments on futures and option premiums, a senior coffee official told Reuters.

The government will make a total of 50 million reais ($30 million) available in loans in an effort to increase access to these more sophisticated price protection mechanisms which have grown costlier to hold amid steep rally in coffee prices.

"This is to give some financial muscle to the producer to operate on the exchange. It's a way to democratize access to the hedging and futures market," said Thiago Masson, substitute director at the agriculture ministry's coffee department.

The cash may not be available until around mid-year, and must be approved by a monetary policy committee, but if supply constraints keep prices higher, the loans should enable more farmers to lock in the best rates they have received in years.

Masson said he expected the steep rally in prices which have more than doubled in nine months would boost demand for the financing. But he added that the new credit line in the world's top coffee producer had been planned long before that.

The Funcafe coffee credit fund will make the loans at the subsidized rate of 6.75 percent, the same charged for other loans made to cover growers' costs until harvest and sale.

Individual producers will be able to obtain the credit to hedge from local banks though some of the cash may be made available through coffee cooperatives.

"This (credit line) is good as it provides an incentive. Producers need to protect themselves against a fall in price. That's what is important right now in a scenario of volatility," said Luiz Claudio Caffagni, commodities services manager at Brazil's commodity exchange, the BM&FBovespa.

Caffagni said that at today's prices, the 50 million reais credit line, if spent solely on options premiums would be enough to hedge roughly 1.25 million bags. How far the cash would stretch for margin calls would depend on the market.

Recently in Brazil and elsewhere, some hedgers on both the producing and importing sides have been forced to abandon hedges as the rally in the coffee market causes margins payable on futures contracts to balloon. See analysis: 

Around 674,000 arabica coffee contracts were traded at the Sao Paulo-based BM&FBovespa exchange last year, up 4 percent from 2009.

Brazil produced 48.1 million 60-kg bags of coffee last year and the forthcoming off-year crop to be harvested from May is expected to turn out 41.9-44.7 million bags.

New York arabica coffee futures for May delivery were trading 0.8 percent lower on Monday at $2.7220 per lb, more than double what arabica was fetching in June last year.
 

Brazil's government has been looking into alternative ways to provide price protection for farmers, and is considering moving away from a system of minimum price guarantees to crop insurance that protects against price falls as well losses. It expects this would still be several years off however.**********

COFFEE FORECAST TODAY & Yesterday's MARKET CLOSE REVIEW

NEW YORK, Arabica coffee futures ended weak on Monday, as investors fled risky assets as the world's third-biggest consumer Japan coped with the aftermath of a devastating earthquake.

U.S. cocoa also finished lower, falling from the sessionhighs after trading firm for much of the session on concern about escalating violence in top grower 

Ivory Coast and uncertainty about the Ivorian export ban set to expire Tuesday.

The opening times for these markets have been temporarily delayed by one hour, through March 25, due to seasonal time changes.

COFFEE
* May arabica coffee futures closed down 1.10 cents  at $2.7330 per lb.
 

* The market settled lower for the third straight day after  hitting a 34-year high at $2.9665 per lb last week.
 

* Coffee futures fell along with the commodity complex, as  the third-biggest economy Japan coped with a nuclear crisis,  and the earthquake and tsunami aftermath - traders.
 

* The economic picture caused many to take money off the  table where riskier assets, such as commodities, were concerned  - traders.
 

* Brazil's government plans to begin offering loans to  coffee farmers to cover the cost of using hedging instruments,  including margin payments on futures and option premiums, a senior coffee official told Reuters.

COCOA
* Benchmark May cocoa futures fell $23 to settle at $3,389.
 

* May closed at a $30 premium to July , widening  slightly from $28 the previous session.
 

* Market was strong for most of the session on concern as  top grower Ivory Coast appeared on the brink of civil war and  on uncertainty about the scheduled end of the export ban there  - traders. 
 

* Gunfire and explosions broke out in an Abidjan stronghold  of Laurent Gbagbo, just outside the private house of his army  chief in Ivory Coast, witnesses and a security source said, but  state TV denied his residence had been attacked. 
 

* Prices turned lower, joining the weak commodity complex  down as investors fled risky assets - traders.
 

* Patchy rains mixed with hot weather last week in Ivory  Coast's cocoa regions provided good condition for better  quality and abundant mid-crop growth compared with last season.******

Ouattara forces strike back

Forces allied with internationally recognised Ivory Coast President Alassane Ouattara yesterday seized control of a fourth town in the west of the country, both sides reported. 

As pro-Ouattara fighters continued the push south of their traditional frontline stronghold, the district of Abobo, the capital, Abidjan, counted losses after a crackdown by strongman Laurent Gbagbo on Saturday left about 10 dead.

A member of Mr Gbagbo's militia said the New Forces fighters, "well equipped (with) rocket launchers and machine guns", took the town of Doke and were headed towards Blolequin.

If they capture Blolequin, the fighters will have access to the port of San Pedro in the southwest, the largest cocoa-exporting port in the world.

Ivory Coast is the world's largest producer and exporter of cocoa. Coffee and cocoa make up 40 per cent of Ivory Coast's export earnings and about one-fifth of its gross domestic product in normal times.

Mr Ouattara made a discreet return to Abidjan yesterday after a foreign tour to enlist support from fellow African leaders as the post-electoral stand-off intensified in the wake of an African Union decision endorsing him as president. A statement issued by the "Ouattara presidency" confirmed his return.

Mr Gbagbo has rejected the African Union endorsement of his rival's presidency, and many fear the deadlock will see a return to a 2002-03 civil war that devastated the once-prosperous country.

In a bid to dislodge supporters of his rival, Mr Gbagbo sent his troops into the Abobo district on Saturday with tanks, mortars and helicopters, leaving about 10 bodies scattered in the streets.

Mr Ouattara's camp denounced the violence as "blind murder", saying it was a show of force by Mr Gbagbo who has "his back to the wall".

On Sunday, residents hurriedly loaded bags in taxis or balanced possessions on top of pick-up trucks as they fled the zone. According to the UN refugee agency, about 500,000 have fled their homes, about 70,000 of whom are seeking refuge in Liberia.----

Sustainable development strategy needed to applay Vietnam coffee secto

A seminar on the sustainable development of Vietnamese coffee was held on March 13 as part of the Buon Ma Thuot Coffee festival.

The seminar, jointly held by the Ministry of Agriculture and Rural Development (MARD), the Vietnam Coffee-Cocoa Association (VIFOCA), and the Dak Lak provincial People’s Committee, were attended by leaders of relevant ministries and agencies as well as domestic and foreign experts.

Speaking at the seminar, Doan Xuan Hoa, Deputy Director General of the MARD Department of Processing and Trade for Agro-Forestry-Fishery Products and Salt Production, said Vietnam’s coffee sector has experienced significant development recently with export turnover increasing from US$483 million in 2000 to US$2.1 billion in 2008, and accounting for about 2 percent of the country’s GDP. He said Vietnamese coffee is exported to more than 80 countries and territories worldwide.

COFFEE FORECAST TODAY & Yesterday's MARKET CLOSE REVIEW

Arabica coffee futures finished lower on Friday, continuing to fall from Wednesday's 34-year high and marking their biggest two-day decline in nearly seven months.

U.S. cocoa settled down for the fourth straight day as the softs complex saw follow-through profit-taking and felt spillover pressure from a commodity complex that dropped following Japan's biggest earthquake on record.

COFFEE
* May arabica coffee futures tumbled 6.15 cents, or 2.2 percent, to close at $2.7440 per lb.
 

 * May closed the week up 0.6 percent.
 

* Profit-taking combined with a lack of roaster buying allowed the market to extend Thursday's steep losses - traders.
 

* Pressure from the larger commodity markets, which fell after the world's third-biggest economy Japan was hit by a major earthquake and tsunami, gave more steam to the downward momentum - traders.
 

* Tight supplies remained, however, and continued to underpin the market - traders.
 

* A potentially devastating storm is brewing in the world's physical coffee market, where a double whammy is hitting the companies that get beans from the farm gate to the cafe table.
 

COCOA
 * Benchmark May cocoa futures dropped $33 to settle at $3,412 per tonne, closing the week down 6.7 percent.
 

* May closed at a $28 premium to July , narrowing from $34 the previous session.
 

* Market fell on follow-through weakness and pressure from the commodity complex that dropped in reaction to the major earthquake and tsunami in Japan - dealers.
 

* Cocoa beans are piling up in east Ivory Coast because of an embargo, while plummeting farmgate prices have pushed planters to abandon farms as Ghana reinforced security at its border to end smuggling - farmers.
 

* Senegal's leader, Abdoulaye Wade, said Ivory Coast was "entering a phase of war" after the latest attempt by the African Union to resolve a power struggle by diplomacy failed.******

Ot - Jan coffee export of Ivory drops 31 pct

Ivory Coast's coffee bean exports totalled 21,630 tonnes from October to January, down about 31 percent on the same period in the previous season, port data showed on Friday.

January is the first month of the official marketing season.

Following are port data for coffee bean exports in tonnes:

                     Jan 11         Dec 10      Jan 10

Abidjan          2,998           3,724       4,522

San Pedro      1,120            1,566       nil

Total             4,118           5,290       4,522

Cumulative   21,630          17,512     31,307****

LIFFE COFFEE, COCOA & SUGAR CLOSE REVIEW

* Liffe May white sugar falls $7.60 to close at  $720.00 a tonne. Prices slide along with other commodity markets  after a huge earthquake and tsunami struck Japan.
 

* Liffe May robusta coffee ends down $87 at $2,421 a tonne, also caught up in the sell-off in commodities. Downward  correction also seen overdue following recent strong advance.
 

* Liffe May cocoa ends down 16 pounds at 2,226  pounds a tonne. Market weighed by broad-based setback in  commodity markets but the conflict in Ivory Coast limits losses. *******