Brazil Sold In Auction 3K Bags Of Arabica Coffee From Government Stocks

According to The Times of India, 3,733 bags of arabica coffee was sold in a auction organized by Brazil’s crop supply agency, Conab, on April 5, 2017. The auction finished government’s coffee stocks for the first time in ten years.

According to Conab, those who bought paid a 5% premium on average for at least 15-year old coffee beans that were stored in government warehouses in the states of Minas Gerais and Sao Paulo. The average price paid for a 60kg bag was $155.

It is a policy of the Brazilian government to intervene in the market for agricultural produce when prices fall below the established market price. The government comes in and buys the coffee from farmers when the prices are below the pre-established limit and sell to the private sector at the market price on a later date.

The last intervention in the coffee market happened in 2009 and it was not through a direct purchase from farmers, as is usually the case. At that time the government offered put options to coffee producers, who never exercised them since market prices were above the strike price in the contracts.

According to the spokeswoman for Conab, the reason why the government has not intervened for a long time is because the market has been dynamic for past years.