Brazilian coffee roasters are, for the first time in a decade, increasing the amount of arabica beans in blends thanks to a drop in the premium over robusta to multi-year lows, a swing offering hope to beleaguered growers worldwide.
Roasters in Brazil have over the last 10 years continued to increase use of robusta beans which, while typically deemed of less good quality, are also less expensive, and were particularly so during the coffee price rally of 2010-11.
However, "for the first time in a decade, Brazilian roasters are increasing the proportion of arabica in their blends," Mauricio Galindo, head of operations at the International Coffee Organization, told Agrimoney.com.
The switch, while in part an effort to revive demand growth in Brazil, narrowly the second largest coffee consuming country after the US, appeared to be largely down to the reduced premium of arabica beans over robusta beans.
The slump in arabica coffee prices – which on New York's futures market have slumped some 60% from 2011 highs to, last week, a four-year low of 115.35 cents a pound - has "narrowed sharply" their premium over robusta beans to the weakest since December 2008, the ICO said.
The premium of Colombian milds has collapsed from some 200 cents a pound to about 50 cents a pound, with that of Brazilian natural beans plunging from more than 150 cents a pound to less than 30 cents a pound.
"This reduction in the differential could help encourage a shift in demand back towards arabica coffee," the ICO said in a report which nudged lower by 100,000 bags to 144.5m bags its forecast for world coffee production in 2012-13, although this remains well ahead of demand, pegged at 142m bags.
'Every effort should be made'
The reduced premium has spelled particular financial hardship for arabica growers, largely concentrated in South America and east Africa, although robusta producers too have suffered from weaker overall coffee prices.
London-traded robusta futures are down some 28% from their 2011 high.
The ICO restated a call to governments in coffee-producing countries to follow Colombia in offering support to farmers, who represent an important part of rural economies, and have been left in many countries facing bean prices below costs of production.
"The socio-economic importance of coffee as a key source of income, particularly in rural areas, means that every effort should be made by governments to support their growers and promote a sustainable coffee supply chain," the organisation said.
The comments came narrowly ahead of a Brazilian government announcement that it was to provide support for Brazil's arabica coffee growers, the world's most important, by buying up to 3m 60kg bags at a price of 343 reais a bag.
The support will be arranged under an options programme, with contracts auctioned off to producers and co-operatives offering the right to sell at that price, equivalent to $149 a bag, or about 112 cents a pound.
While lower than the current New York futures price, it is above the 238.53 reais a bag that coffee was trading at on Brazil's cash market on Tuesday, according to the University of Sao Paulo's Cepea research unit.
Dilma Rousseff, the Brazilian president, announced the support programme on a trip to Minas Gerais, Brazil's top coffee-producing state.
"I was here in the region when I was a candidate for president in 2010, and I know how important the coffee producers are for the economy," she said.
Arabica coffee futures for September delivery closed up 2.8% at 121.05 cents a pound in New York.