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Less high-quality coffee beans coming from Brazil -traders, exporters

By Marcelo Teixeira

SAO PAULO, Aug 3 (Reuters) - Exporters and traders operating in the Brazilian coffee market are reporting fewer-than-expected deliveries of high-quality beans, blaming bad weather, a beetle infestation and farmers sitting on stocks as the harvest wraps up.

The global coffee market was already expecting smaller volumes from Brazil during the off-year in its biennial coffee cycle, but output is likely to be even smaller than forecast, particularly for high quality, export-type beans. Brazil is the world's largest coffee producer and exporter.

If the more negative outlook holds through the end of the harvest this month, traditional buyers of high-quality Brazilian coffee might have to fill their orders elsewhere.

Brazil's coffee exports in July hit the lowest volume for a month in over 10 years, at 1.6 million bags.

Fine cup coffee deliveries so far this year are about 30 percent below this time last year, according to a trader at one of the five biggest export houses in Brazil's top-producing state, Minas Gerais.

By comparison, crop agency Conab forecast an 11 percent drop in Brazil's total coffee harvest to 45.5 million bags in 2017, including lower-quality coffee and the robusta variety.

Reuters reported last week that an infestation of the berry borer beetle known as "broca" is the worst in recent memory, hurting crops.

The trader in Minas Gerais said lots arriving for export in many cases have shown damage to around 8 percent of beans. In extreme cases, damage was as high as 15 percent.

"Beans are smaller and many lots are being rejected by buyers due to borer beetle damage beyond the 5 percent limit," the trader said. "Some buyers are negotiating discounts to receive coffee with more damage."

The chief coffee trader at an international commodities merchant told Reuters some exporters have been surprised at the slow pace of fine cup arrivals in the market.

"From my point of view, the real problem is the borer infestation. But farmers are also helping to reduce deliveries by hoarding coffee in the hope of better prices," he said.

Glaucio de Castro, a coffee farmer with 312 hectares in the cerrado region of Minas Gerais, said it was tough to spray for the beetles because trees are leafier in off-years. He also said dry weather may have reduced bean size.

"I expected a smaller harvest, due to renovation and stress in trees after last year's crop. But in the end, it will be 20 percent below my estimate," he said. (Additional reporting by Marcy Nicholson in New York and Roberto Samora in Sao Paulo; Editing by Brad Haynes and Jeffrey Benkoe)