Brazilian coffee farmers hold supplies due to low prices

Brazilian coffee farmers see current prices as insufficient to cover costs and have no intention of selling at the moment, despite a looming record crop, producers and market experts said. They said dealings in the Brazilian market were very thin with prices for fine arabica beans 15 percent lower than at this time last year, discouraging forward sales of new crop product.
"I need to fetch at least 500 reais ($154) per bag," said Jose Antonio Vilela, who farms coffee in Alpinepolis in the world's largest producing region of South Minas Gerais. "Fertilizer and fuel went up," he said. Vilela says prices for fine quality arabica coffees are around 420 or 430 reais, while a year ago he could sell for close to the 500 reais he seeks this year.
The world's largest producer is expected to harvest a crop that analysts see near 60 million bags, a record. Last year, sales were already slow amid a smaller crop and quality problems due to adverse weather and insect infestations. Exports fell 10 percent. January 2018 shipping numbers were 5 percent behind an already low January 2017.
But stocks in consuming countries are at reasonable levels, leading buyers to wait for the new crop to arrive around May or June. "At this time last year, I would have sold at least 20 percent (of new crop)," said Abiandino de Souza, a farmer at Botelho, also in South Minas. "Sold none so far."
Reuters talked to the farmers in Guaxupe, the city in the heart of Minas Gerais producing region. Farmers, traders and analysts gathered in the town for an annual coffee fair. The producers' views were confirmed by other market participants. Mauricio di Cunto, head trader at Comexim, a leading coffee exporter, said farmers had good years recently and are capitalized. "They are in no rush to sell," he said.
Di Cunto believes producers will gamble and wait for eventual price spikes to trade some of their coffee. New York futures for arabica at around 118 cents per pound are near their lowest levels in years and far below the last bull cycle in 2014, when prices went above 220 cents per pound. Gil Barabach, an analyst with Safras & Mercados consultancy, said producers are likely to hold until harvest starts. "They will need cash to finance the harvest then," he said.