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In El Salvador, coffee farmers turn to bourbon beans after blight

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By Marcy Nicholson

NEW YORK (Reuters) – For Alberto Ferracuti, a coffee grower in El Salvador, bourbon really does grow on trees.

Ferracuti and many other farmers in the Central American country have turned to specialty coffee trees – identified by fanciful names such as bourbon, geisha and pacas – in hopes of reviving a local industry devastated by crop disease just a few years ago.

The trees produce some of the world’s highest quality coffee, beans with distinctive tastes prized by consumers in the United States and elsewhere who are willing to pay up for top-drawer coffee. Specialty coffee can earn farmers more than twice what they make selling standard varieties.

The result is that El Salvador, though a small producer by size, has one of the world’s most diverse coffee crops. This year, El Salvador harvested about 740,000 bags, roughly 1 percent of what Brazil, the world’s biggest producer, will produce.

But specialty coffee accounts for a rapidly increasing share of its production, giving it an outsized role in the high-end coffee market. Last year, specialty coffee made up about 65 percent of its exports, a figure expected to rise to 80 percent by 2025, according to Salvadoran Coffee Council data. (For graphic, see https://tmsnrt.rs/2sja24e)

The strategy comes with a shot of risk: The trees are highly susceptible to the very crop disease, roya, that cut El Salvador’s harvest by 60 percent four years ago. And the threat remains, with four new strains of roya just identified in neighboring country Honduras, a U.S. attache reported last month.

“Some people think we’re crazy to pursue this,” said Ferracuti, whose family farms 75 hectares (185 acres) in central and western El Salvador.

Elsewhere in Latin America, where 60 percent of the world’s beans are grown, many farmers have avoided specialty trees and reduced their crop diversity. Instead, they have concentrated on planting trees bred to increase yields and resist roya.

An air-borne fungus, roya thrives in warm and wet conditions, latches onto leaves and eventually damages or kills trees. An outbreak that hit production in the 2013/2014 crop year, the worst on record, cut coffee output in Central America by 10 percent. El Salvador was among the hardest hit, and has yet to fully recover.

Ferracuti and farmers like him aim to keep their trees safe from future roya outbreaks through a combination of improved husbandry and increased fertilizer and fungicide use.

Some said they are planning to replant trees every 10 to 12 years, rather than let them stand for decades, which is typical on many farms. This is potentially costly, but young trees have a better chance of fighting off the blight, they said.

MILK CHOCOLATE AND CITRUS ZEST

The global dollar-denominated benchmark coffee price for commercial grades of arabica beans, known as the “C” market <KCc1>, has hovered around $1.20 per pound the past year.

That is about the same actual price that the coffee garnered in the 1980s, and is close to the cost of production in some mountainous countries such as El Salvador. The cost of production is higher on steep hillsides, where crops must be harvested by hand.

But specialty beans can cover those costs, plus some, given the premium they carry to standard varieties. Farmers said their specialty beans can fetch around $3.50 per lb, a premium of more than $2 over the current “C” price.

Selling against the “C” market is akin to putting money “in a bag with a hole,” said Gilberto Baraona, whose family has farmed coffee in El Salvador for four generations.

Baraona, who lost 75 percent of his farm to roya, now farms bourbon and pacamara trees at higher elevations, where the combination of warm days and cool nights lessens the risk of disease and creates some of the highest quality beans. Baraona’s specialty coffee export business has doubled in annual sales since 2010, he said.

“You can live with pacamara and bourbon if you have a system to combat disease,” he said.

Brought to Latin America in the 1800s, bourbon is a relatively low-yielding tree – but what it produces is highly sought after in discerning coffee houses.

Cheryl Kingan, who buys red bourbon from family farms in El Salvador for specialty roaster Café Grumpy in New York, associates these beans with milk chocolate, hazelnut, graham cracker and candied citrus zest.

What’s more, she said Salvadoran growers are experimenting with even more specialized beans, offering new, distinct flavors to their coffees.

“These smaller experiments take years to yield larger profit results, so in the meantime bourbon continues to shine and act as the workhorse of the Salvadoran specialty scene.”

Eduardo Alvarez, operations manager for specialty coffee exporter El Borbollon in the country’s third-largest city, Santa Ana, said that new producers bring quality beans to his business every year.

“The farmers that are surviving, are surviving because they’re exploring this quality driven market,” Alvarez said.

(Additional reporting by Nelson Renteria in Santa Ana, El Salvador; editing by Simon Webb and Paul Thomasch)

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Trump tweet before U.S. payrolls report raises eyebrows

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(Reuters) – President Donald Trump set tongues wagging across Wall Street and among economists on Friday when he tweeted what some viewed as a tip about the big monthly U.S. payrolls report due out later in the morning.

“Looking forward to seeing the employment numbers at 8:30 this morning,” Trump said by tweet at 7:21 a.m. EDT (1121 GMT), just over an hour before the highly anticipated news was released.

The post was quickly retweeted thousands of times, especially by market participants, economists and financial journalists for whom the monthly data is a top-tier news event.

“Since we know the president gets the report way in advance, it’s probably safe to assume it’s a beat,” Yahoo Finance Managing Editor Sam Ro tweeted.

Indeed, the number was a bit stronger than expected, with 223,000 U.S. jobs created in May, 35,000 above the Reuters estimate of 188,000. The unemployment rate dropped to an 18-year low of 3.8 percent.

It does not appear, however, that market participants jumped to trade on Trump’s tweet before the official release.

S&P 500 e-mini futures <ESv1> were up about 12 points, or 0.45 percent, before his tweet, then nudged about 1 point higher in the moments afterward. There was no discernable pick-up in trading volume to accompany the move to suggest market players saw it as a tradable tip.

Similarly, futures on the 10-year Treasury note <TYv1> were lower and added fractionally to the losses, but as with the equity futures, no volume acceleration accompanied the move.

Larry Kudlow, director of the White House National Economic Council, said in television interviews later on Friday that he had briefed Trump on Thursday about the numbers. By law, the NEC head is one of a handful of administration officials allowed an advance view of the report before its public release from a high-security lockup at the Labor Department, typically on the first Friday of the month at 8:30 a.m. EDT (1230 GMT).

“It is my call on whether to send them over to the president, to give him a call or have a meeting with him. That’s just what I did last evening,” Kudlow said on CNBC.

“He has a right to know. He is the commander in chief. That’s all. He chose to tweet. His tweet basically said, like everybody else, we await the jobs numbers. You can read into that ten different things, if you want to read into it.”

Trump has frequently tweeted about robust jobs numbers after they’ve been released, but this was the first time he did so ahead of its release.

A 33-year-old rule from the White House Office of Management and Budget governing the release of embargoed economic data forbids executive branch employees from public discussion of the data within an hour of its release.

Last year, members of the Trump administration drew criticism for commenting on the numbers too quickly after their release.

Members of past administrations chided the president for breaking protocol and potentially offering an advance view of one of the world’s most market-moving pieces of economic data.

“If during the Clinton or Obama Administrations there had been a statement from @POTUS or any senior official in the morning before the Employment Report it would have been a major scandal – with all sorts of investigations following on,” tweeted Lawrence Summers, who served as Treasury Secretary under Democratic President Bill Clinton.

Trump’s post was also seen as heightening an already intense focus on Trump’s Twitter handle by market participants.

“Traders will now be watching the president’s Twitter account much more closely ahead of the jobs release to see if he says anything,” said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City.

“If he does (like today), then the forthcoming report is likely bullish and money will move accordingly. If he’s silent, maybe it’s not so great. Traders, right or wrong, may play that game for a while and that’s a potentially interesting twist.”

(Reporting by Dan Burns; Editing by Jeffrey Benkoe)

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U.S. may open door to more temporary immigrant workers

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WASHINGTON (Reuters) – The Trump administration is examining ways U.S. industries could hire more immigrant workers on a temporary basis, White House economic adviser Larry Kudlow said on Friday, as data showed the United States unemployment rate at an 18-year low.

“We are looking at ways to bring temporary immigrants with temporary visas legally into the United States in a number of industries,” Kudlow told CNBC in an interview, adding he did not want to say more that would “get ahead of the curve.”

Kudlow, who also spoke on Fox Business Network, noted that while the White House was wrestling with Congress over legislation to address immigration long-term, “I think you’re going to see some progress” on immigrant employment visas near-term. He gave no other details.

Earlier on Friday, Labor Department data showed job growth accelerated in May and the unemployment rate dropped to 3.8 percent, pointing to rapidly tightening labor market conditions that also showed wages rising solidly.

The strong employment report also hinted at a labor market squeeze that could leave employers struggling to find qualified workers, slowing job growth and lifting wages.

“The labor market is tightening rapidly and declines in the unemployment rate are likely to continue, but at a slower pace,” Ben Herzon, an economic analyst at IHS Markit, wrote in a research note.

The Trump administration last week opened up another 15,000 H-2B visas to help U.S. employers hire temporary non-agricultural workers in an effort to help fill seasonal jobs during the busy upcoming summer tourist season.

A number of U.S. employers, from seafood processors to hotels and restaurants, have complained that they cannot fill jobs with domestic workers and were shut out of the visa process, which this year was run as a lottery for the first time rather than the usual first-come, first-served basis.

Across the country, businesses have reported shortages of qualified workers for a variety of trades, including truck drivers, sales personnel, carpenters and tech workers, the U.S. Federal Reserve said in a report on Wednesday.

Rising U.S. wages could drive more Americans into the labor market, Kudlow said.

“There are a lot of Americans out there who would love to work if the price is right and the job is right,” he told CNBC.

 

(Reporting by Susan Heavey; additional reporting by Tim Ahmann and Jason Lange; editing by Chizu Nomiyama, Bernadette Baum and Jonathan Oatis)

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Goldman Sachs vice president charged with insider trading

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By Brendan Pierson

NEW YORK (Reuters) – Federal prosecutors charged a vice president at Goldman Sachs Group Inc <GS.N> on Thursday with insider trading by illegally using non-public information about several companies that were clients of the investment bank.

Prosecutors said Woojae “Steve” Jung, a 37-year-old Korean citizen, made more than $130,000 by trading illegally on confidential information relating to upcoming transactions and merger negotiations that he was privy to through his job.

Authorities said Jung, who joined Goldman in 2012 and worked in San Francisco, conducted his trades through a brokerage account in the name of a friend living in South Korea. The brokerage account was accessed from internet addresses that were traced to Jung, according to the U.S. Securities and Exchange Commission.

“Woojae Jung violated his duty to his company and traded on stolen insider information, over and over again,” U.S. Attorney Geoffrey Berman in Manhattan said in a statement.

Christopher Steskal, a lawyer for Jung, declined to comment.

A Goldman representative said the company had placed Jung on leave.

“We are aware of the situation regarding Mr. Jung and are cooperating with legal authorities on the matter,” the person said in a statement.

Jung, who was arrested on Thursday morning in San Francisco, was expected to appear in federal court later in the day, according to prosecutors.

He was charged with six counts of securities fraud and one count of conspiracy. He also faces related civil claims from the SEC.

Prosecutors accused Jung of illegally trading ahead of announcements or reports of a reorganization by W.R. Grace & Co <GRA.N>; Foresight Energy LP’s <FELP.N> acquisition by Murray Energy Corp; SanDisk Corp’s acquisition by Western Digital Corp <WDC.O>; KLA-Tencor Corp’s proposed acquisition by Lam Research Corp <LRCX.O>; Microsemi Corp’s <MSCC.F> proposed acquisition by Skyworks Solutions Inc <SWKS.O>; and CA Inc’s <CA.O> proposed acquisition by BMC Software Inc.

The SEC said Jung also traded improperly in other companies, including NXP Semiconductors NV <NXPI.O> and WebMD Health Corp.

Authorities said Jung’s scheme began in early 2015 and continued until the middle of 2017, when the SEC sought information from Goldman about which employees had access to confidential information about certain transactions.

Following that request, according to prosecutors, someone called the brokerage firm whose account was used to make the illegal trades.

Using the name of Jung’s friend in Korea, the caller said the account had been opened using stolen personal information, and that he was concerned about the transactions in the account, prosecutors said.

 

(Reporting by Brendan Pierson in New York; Additional reporting by Aparajita Saxena; Editing by Bernadette Baum and Lisa Shumaker)

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Britain’s Carney says U.S. trade focus should be on services

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By David Milliken

WHISTLER, British Columbia (Reuters) – The United States should focus on freeing up trade in services rather than imposing tariffs on imported goods, Bank of England Governor Mark Carney said on Thursday after the United States said it would levy tariffs on steel and aluminum imported from the European Union.

Speaking at a meeting of finance ministers and central bank governors from the Group of Seven rich nations in the Canadian mountain resort of Whistler, Carney highlighted the dominance of the services sector in the global economy, though he said that responding to tariffs was not his direct responsibility as a central bank governor.

“But the bigger context we would put this in is to say that this focus on goods trade … is not the right focus in a hyperconnected world where most of the economic activity, most people work, most small businesses, most women, work in the service sector,” he told a panel discussion.

Britain’s trade minister, Liam Fox, speaking shortly after Carney, said he could not rule out retaliatory tariffs. [L9N1RM05C]

Carney said that if countries made the same progress on freeing up trade in services as had been achieved on goods trade in the past, both the United States’ and Britain’s total trade deficits would be half their current size.

Separately, Carney said better protections were needed for investors in cryptocurrencies such as bitcoin, and said it would be on the agenda for regulators meeting in Whistler.

“We need to regulate for the people who want to play in that space, if I can put it that way. They deserve the same level of investor protection as investors in other areas, and they are certainly not getting it,” he said.

British regulators, including the Bank of England, are working on a report on cryptocurrency regulation that is due later this year.

Carney has previously said cryptocurrencies are a poor alternative to existing central bank payment systems, but that the underlying technologies may have valuable applications.

(Reporting by David Milliken; Editing by Chizu Nomiyama and Leslie Adler)

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