Arabica coffee prices in Brazil, the world’s biggest grower of the commodity, will hold steady around a five-year high as rising demand outpaces supply, a research group said.

Growers will sell coffee harvested from April to September for 300 reais to 310 reais ($170 to $176) a bag, said Fernanda Geraldini, an analyst at the University of Sao Paulo’s Cepea research unit. Coffee in Minas Gerais state, the biggest producer in Brazil, rose to 313.07 reais on June 24, the highest since March 2005, according to Cepea data.

Rising global demand will top output this year and be enough to absorb the increase in supplies as a bumper Brazilian crop hits the market, Geraldini said. Coffee futures in New York fell the most in a week yesterday on concern that the bigger Brazilian harvest would spur sales.

“The supply of good quality coffee is very small, so prices will stay high even after bigger volumes enter the market in August,” Geraldini said yesterday in a telephone interview from Piracicaba, Brazil.

Brazilian output will increase 23 percent to a record 55.3 million bags this year as crops enter the more-productive phase of a biennial cycle, the U.S. Department of Agriculture said June 18. One bag weighs 60 kilograms, or 132 pounds.

Source: Bloomberg

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