Brazil sells all coffee in auction, finishes government stocks

SAO PAULO: Brazil's crop supply agency Conab sold all 3,733 bags of arabica coffee from the government's supply in an auction on Wednesday, zeroing out public stocks for the first time in at least ten years.

Conab said buyers paid a 5 percent premium on average for coffee beans as old as 15 years stored in government warehouses in Sao Paulo and Minas Gerais states. The average price was 424 reais ($155) per 60-kg bag.

Brazil's government has a policy to intervene in agricultural markets. It buys coffee and other staples from farmers when prices for products fall below a pre-established threshold and later sell the products to the private sector at market prices.

The last intervention in the coffee market happened in 2009 and it was not through a direct purchase from farmers, as is usually the case. At that time the government offered put options to coffee producers, who never exercised them since market prices were above the strike price in the contracts.

"The coffee market has been very dynamic in the last few years, so it has not been necessary to intervene," said a Conab spokeswoman.

Brazil is at the peak of its inter-crop period. Farmers should start to collect the first lots of new-crop coffee in coming weeks.