Tight coffee supply to embolden Brazil producers

Coffee producers in Brazil, the world's top grower, will have the upper hand in trading their stocks in the long inter-harvest from October to May with a smaller 'off year' crop to sell and growing demand. Global demand for the popular caffeine drink has continued to grow despite the economic storms of the past few years while supply growth lagged, as Brazil's trees take time to respond to improved use of inputs and husbandry.
Local brokerages say closing deals between producers and importers for coffee is getting tougher with volatile futures prices causing producers to hold out in hope of a better deal. Brazil coffee will remain "expensive because producers are very much in the driver's seat.
They are selling very little and are very disciplined and demand is big. It's a producers' market," said trader John Wolthers at exporter Comexim. He said discounts for medium to good Swedish arabicas, were currently at $0.22 to $0.25 per lb versus the New York 'C' contract. That compares with discounts as wide as US $0.35 to US0.38 cents in 2010 when supplies where more comfortable.
Tightening the screws further this year is the forecast 5 percent rise in coffee consumption in Brazil, already a huge market and one set to knock the United States off the top spot as early as 2012 if that pace of growth keeps up. Brazil is demanding more quality as well as quantity, stepping up its presence in the market for good natural and wet processed mild coffees to pop into now popular home espresso machines, precisely the grades importers want most.
Local commodities consultancy RC Consultores expects Brazilian stocks to be run down by the end of the season which runs from July 2011 to end-June 2012, to the same level they stood at when the season began - just under 4 million bags. Working with the USDA's comparatively high production estimate of 49.2 million bags, RC estimates that quantity will be entirely swallowed up between 29 million bags in exports and 20.1 million bags in local consumption.