LONDON: A rare batch of Brazilian arabica coffee has been certified as deliverable by the ICE exchange, reinforcing bets that rising stocks from the world's top producer will soon start to alleviate supply worries and weigh on futures prices.
Arabica stocks in ICE warehouses are currently at 20-year lows and an influx of Brazilian beans could provide a significant boost, though it remains unclear whether the coffee can pass the exchange's strict quality controls in significant quantities.
ICE arabica futures are backed by "washed" coffee beans, while Brazil produces mostly unwashed grades, although this season's record crop is of high quality and expected to contain a fair amount of semi-washed grades.
Latest ICE data shows 855 60-kg bags of Brazilian arabica in exchange warehouses in Antwerp was graded as deliverable on Friday, more than doubling, in one day, the total amount of Brazilian coffee held by the exchange.
The data also showed, however, that 3,060 bags of coffee failed the quality check. If, as some suspect, all or most the bags that failed were Brazilian coffee, it could deter more deliveries from the South American nation.
"It has to be Brazils (that failed)," said a London-based coffee trader. "If you look at (physical coffee prices), the only coffee these last few months that was feasible to deliver was Brazils."
Exchange data on grading passes and fails does not specify the country of origin.
'Differentials' or premiums for coffees that are usually delivered to ICE like Honduras, have risen to record levels this season, making it unfeasible to deliver them to the exchange.
Market rumours have swirled that between 200,000-500,000 bags of semi-washed Brazilian coffee would be delivered to the exchange by year-end.
ICE arabica futures are highly correlated with exchange stocks. Since July 1, prices have risen some 32%, breaking above $1.30 per lb, while stocks have slumped some 29% to under 1.2 million bags.
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