Expectation of lower crop production boosts prices

Different from what happened in July, when coffee prices kept almost stable, arabica values increased expressively in the first fortnight of August. The CEPEA/ESALQ for arabica type 6, delivered in Sao Paulo (capital) closed at 261.33 reals or 128.67 dollar per bag of 60 kilos on Wednesday, August 15, upping 8.7 percent in Real over July 31st.

At the New York Board of Trade (Nybot), arabica contracts for September valuated 4.3 percent in the same period, closing at 119.20 cents of dollar per pound last Wednesday, Aug 15th. Among other factors, the support came from the expectation of lower Brazilian coffee crop production - due to the small size of the grains from the 2007/08 crop. In the context of higher prices, trades moved at a better pace in the domestic market. The exchange rate has been also positive for the Brazilian coffee market.

Due to the increase of domestic arabica prices, players have speculated about the possibility of getting the premium offered by the Brazilian government in the Equalization Premium Paid to the Producer (Pepro) auctions. Growers and cooperatives that participated in the auctions must sell the product at more than 260.00 reals per bag until June of 2008 in order to receive the premium.

For robusta, trades also moved at a better pace. The CEPEA/ESALQ Index for that variety (type 6, in the origin Espírito Santo state) averaged 200.66 reals or 98.80 dollars per bag of 60 kilos, little increase of 0.43 percent in Real over July 31st.

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