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  • QA 120
    Question:
    Do Cecafe and the public auctions play a role in the setting of producer prices in Brazil?
    Background:
    How is the price to Brazilian producers established? What role do Cecafe and the public auctions play?
    Asked by:
    Student - France
     
    Answer:

    Producer prices in Brazil are set by supply and demand, by the free market in other words. Neither Government nor industry associations determine farm gate prices - producers decide themselves when to sell and at what price. 

    Brazilian producers have access to excellent price information, both through the many large Co-operatives that operate, a large number of traders and exporters, as well as through the only active coffee futures market in a producing country, BM&F in Sao Paulo (see section 08.07 or go to www.bmf.com.br). Of course Brazilian coffee is traded internally in the local currency, the Real, and externally in US Dollars. Exchange rate fluctuations therefore impact significantly on farm gate prices.

    Cecafe, the Conselho dos Exportadores do Café do Brasil - www.cecafe.com.br , is an inter-professional association that brings together otherwise independent and competing companies. Their common interest is the export of coffee from Brazil and the association provides them with a common platform. However, the association has nothing to do with pricing at the farm gate.

    The auctions you refer to are used to dispose of certain stocks that Government had built up in past years of low prices when it offered growers certain price support assistance. This assistance consisted of offering growers the opportunity to purchase put options (see section 09.03 of the Guide), thereby effectively placing a floor under the market. What is being auctioned are older coffees, for use by the local roasting industry. The quantities being sold are modest compared to Brazil's huge domestic demand (currently around 16 million 60kg bags) and do not impact on farm gate prices.

    Posted 31 October 2006
     

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