Exclusive: Brazil weighs offering coffee options to support prices – sources
SAO PAULO (Reuters) – The Brazilian government is considering offering put choices to coffee producers that allows you to shore up prices in the 13-year low and assure the minimum income for struggling farmers, two different people with understanding of the talks told Reuters on Thursday.
The program, if approved, would give producers the authority to sell their crops for the government at a fixed price, setting the ground for coffee prices in the world's largest coffee producer and exporter. Which would likely force buyers to repay more for Brazilian coffee and encourage other coffee-growing countries that you follow suit.
Producers are actually pressuring Brasilia to consider put options and rebuild government bean inventories that had been sold earlier this decade.
"We have now talked to the federal government so they liked the concept," a director on a Brazilian coffee cooperative told Reuters.
"It is a win-win program. Farmers could be guaranteed better prices, additionally, the government can later exploit the sales of that coffee when prices recover," he was quoted saying.
Another industry source said he previously also found out about the talks from producers that he or she advises. That source declared many details still had to be figured out, such as the program's size plus the standard of the cost floor.
The sources wanted anonymity since they are not authorized to dicuss publicly for the issue.
Brazil's Agriculture Ministry did not interact with a request comment.
Coffee prices in New york city hit an innovative 13-year low immediately as output surpasses demand in the global market. Arabica prices were trading at 95.20 cents per pound on Thursday, down 0.16 percent.
The Brazilian government has been involved in the coffee market prior to now, intervening with policies that will help farmers when market prices were at or below production costs.
Brazil last used options in 2019, if it offered contracts for farmers to offer approximately 3 million bags into the government with a fixed price. The put options required coffee producers to cover a small fee most effective selling their coffee on the government.
If market expense is under the fixed price seeking the choices as soon as they expire, the software creator normally exercises the possibility and offers the product to government warehouses.
The Brazilian government sold the beans acquired while in the 2019 program when prices recovered through 2019 had eliminated its coffee inventories.
One obstacle to the program would be the potential cost towards government of immeasureable reais in the moment when President Jair Bolsonaro has pledged to rein in public spending reducing a large budget deficit.
Even when the Agriculture Ministry agrees for the idea, it could ought to pass muster with Economy Minister Paulo Guedes, who has vowed to chop industry-specific subsidies, ahead of Bolsonaro's signature.
The first source said the thought could be to launch this method in 2020, when Brazil is expected to make a larger crop, based upon its biennial coffee production cycle.
2019 is really an off-year for Brazil's coffee fields, as well as the government expects production to fall to between 50.5 million and 54.5 million 60-kg bags from your record of 61.6 million bags stated in 2018.