Brazil coffee frost sparks default fears, crop recovery may take years

brazil coffee frost sparks default fears crop recovery may take years

Sumary of Brazil coffee frost sparks default fears, crop recovery may take years:

  • SAO PAULO/NEW YORK (Reuters) – Frost that struck Brazil’s coffee belt this week has sparked fears of farmers defaulting on deliveries of recently-harvested coffee that were sold to commodities traders months ago at prices that now are half the current values.
  • Farmers may think twice about meeting their contract obligations for the current crop, said traders and analysts, as ICE futures for arabica have sky-rocketed.
  • [SOF/L]“These farmers sold coffee for as low as 500 reais ($96.20)(per 60-kg bag),” said Judy Ganes, a U.S.-based soft commodities analyst, adding that the worst drought in 90 years had already cut Brazilian coffee production.
  • Some farmers have sought to renegotiate prices with traders before the frost.
  • “The market was talking about defaults when prices were 40 cents below,” said a European coffee trader who added the latest pricing “made the risk 10 times more likely.
  • ”Arabica coffee prices rose 10% on Thursday to $1.95 per pound, the highest in six-and-a-half years.
  • A broker who works with large international traders sourcing coffee in Minas Gerais, Brazil’s largest producing state, said the physical market is frozen.
  • ”Airton Gonçalves, who has nearly 400,000 coffee trees in Patrocinio, Minas Gerais, state said he delivered 1,500 bags to European trader Sucafina this week, a day before the July 20 frost.

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