Brazil officials join attack on coffee speculators
By - Published 21/12/2012

Typically, hedge funds are accused of pushing agricultural commodity prices unduly high, so inflating consumers' bills above levels that critics feel is justified.

But in Brazil, speculators are being blamed for dragging arabica coffee futures below fair value, punishing unfairly producers of the bean.

Officials from Brazil's top farming authorities taken up the cause of the Conselho Nacional do Café producers' group, which fingered speculators for the extent of a drop in arabica prices to two-year lows below 140 cents a pound on New York's futures market.

In May last year, New York's front contract hit 306.25 cents a pound, just over 10 cents from a record high.

'Purely speculative'

The sharp price fall is "purely speculative", said Silvio Porto, director of farm policy and information at Conab, the official crop bureau.

"The drop in prices is not justified, as they fell because of claims that there is plenty of coffee in Brazil," ideas which were not supported by Conab data.

Brazil produced 50.8m bags of coffee this year, Conab said this week, higher than demand of some 18m bags from export markets and 28m bags domestically, but still leaving carryover inventories low, the bureau said.

Furthermore, 2013 will in Brazil be "off" period in the country's cycle of alternate higher and lower producing years.

'Confusion of data'

Jose Gerardo Fontelles, agriculture minister, said that the government was "concerned when there is speculation, and the numbers show that there is no excess of beans.

"We are still working on there being a smaller crop next year than in the current year."

The comments follow allegations by the Conselho Nacional do Café that buyers have been releasing exaggerated estimates for Brazil's coffee production, with the aim of depressing prices.

The council attacked as "absurd" a forecast by coffee exporter Terra Forte last week that Brazil's coffee harvest would hit 53.4m bags in 2013-14.

Mr Fontelles called for an "end the confusion of data" on Brazilian coffee output, with reports in Brazil saying that government officials had been concerned over Terra Forte's forecast, and a US Department of Agriculture estimate that output reached 55.9m bags this year -5m bags more than Conab's estimate.

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