COMMODITIES-COFFEE: Brazil's Production Down, Prices Rise

LONDON, Nov 11 (IPS) - The coffee market was dominated this week by the Brazilian government's official estimate of its 1995-96 crop losses during the two frosts earlier this year and the drought that followed it.

The Brazilian government forecast that the crop will be between 12.7 and 14.4 million bags. "This throws cold water on some of the 20 million bags plus estimates which have been going around recently," said one London broker.

The Brazilian estimate will shortly be closely followed the United States Department of Agriculture (USDA) report on the losses, regarded by many as a better indication of the crop.

The Brazilian estimate has been delayed by a lack of data from one of the major coffee growing areas. Before the announcement local trade houses were putting the crop at 13.95 million 65kg bags. "Any figure below 16 million bags makes the market tight," said London futures brokers, GNI in its commodity report.

Most analysts are sceptical of the estimates since the true picture will only become clear in January, said GNI.

Before the estimate was released the coffee market was quiet. The estimates were at the low end of recent forecasts and analysts were keeping a watch on Brazilian government statements.

Mid-week, the crop estimate was almost overshadowed by rumours that a 10 per cent export tax is to be imposed in Brazil, similar to that put on sugar a few weeks ago.

"This caused a rush of physical business," explained a London trader. Coffee closed on the London Commodity Exchange (LCE) on Monday at 3,400 a dollars a tonne for November delivery, 3,435 dollars a tonne for January. Tuesday it ended trading at 3,525 dollars a tonne, 3,570 dollars a tonne for the second position.

Mid-week, the commodity saw the bell at 3,473 dollars a tonne for November, 3,516 dollars a tonne for January, moving down after this.

Thursday, coffee ended in London at 3,445 dollars a tonne for November, 3,510 dollars a tonne for January. By Friday evening the contract finished trading at 3,430 dollars a tonne for November, 3,471 dollars a tonne for January.

Guatemala cut its coffee production estimate this week, arguing that its 1994-95 harvest will be 3.8 to 3.9 million bags. Earlier estimates put the crop at 4.1 million bags. Other Central American estimates are expected soon.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service