Brazil crop supply agency Conab said on Friday it plans to auction off 300,000 to 400,000 bags of arabica coffee by the end of the year in biweekly auctions. Brazil holds 1.56 million bags (of 60 kg each) of arabica coffee in government-controlled warehouses, which it acquired in past years to support domestic prices during harvest.

Conab had been selling lots of 9,000-40,000 bags in periodic auctions earlier in 2015 but stopped in recent months.

Auctions

Demand in the auctions was chequered due to the pricing of the coffee on auction.

Traders said they considered prices high at the time for the quality of coffee on offer.

Dates, prices and exact volumes of coffee to be auctioned later this year have yet to be defined by the Agriculture Ministry.

Current-crop good cup arabicas are quoted as low as 465 reais a bag ($0.93/lb) at hinterland warehouses. In September, Brazil finished a disappointing harvest of 43-50 million bags, depending on the forecast, and privately held stocks for the commodity are expected to fall to extremely low levels in the second quarter of 2016.

Growing state

Drought in early 2015 in Espirito Santo, Brazil’s main robusta growing state, slashed output by 20 per cent to 30 per cent to roughly 11 million bags and has caused prices for the bean on the local market to rise, hurting margins for local roasters.

Brazil’s smaller robusta crop is almost entirely consumed on the domestic market and the auctions of old crop arabica beans are expected to help ease prices for local roasters, which have reported using more of the milder bean in their blends.

Conab did not say whether the auctions would continue into 2016.

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