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.