DJ Mexico,C.America Cash Coffee: Quiet As Producers Watch Brazil

Physical trading continued at a slow pace this week in the cash arabica coffee markets of Mexico and Central America as producers hold on to the little 2007-08 crop still not sold, traders said Friday.

Traders said producers were hoping that international arabica futures prices will rally if any potential weather problems emerge in the world's leading grower, Brazil, as it is starting its 2008-09 harvest.

"The market has been quiet, there just isn't really a lot of coffee left at this time of the crop cycle and producers are not too excited to sell at the current prices with the Brazil frost season still ahead," said one trader.

Offers from producing countries continued to be seen from all origins in the Mexico-Central America region with El Salvador and Honduras reported as the most aggressive, but no major volumes were seen trading.

An estimated 200,000 bags of current crop is still believed to be available in El Salvador, and up to 500,000 bags are still seen uncommitted in Honduras, traders in the region estimated.

Cash differentials for most origins in the region remained largely stable, but margins between bids and offers narrowed a little after weeks of staying up to 10 cents per pound apart for some grades.

El Salvadoran high grown beans were quoted at discounts between 3 cents per pound and 5 c/lb, compared to discounts last week quoted between 2 c/lb and 5 c/lb.

Arabica prices at the ICE Futures U.S. exchange in New York closed up 5 points at $135.85 cents per pound Friday while the more forward September contract settled 5 points higher at $138.25 c/lb.

-By Maja Wallengren, Dow Jones Newswires; 5255-5080-3452; maja.wallengren@dowjones.com

(END) Dow Jones Newswires

06-06-08 1854ET

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