EXCLUSIVE traders ship Asian coffee to ICE exchange as shipment lockdown eases

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A worker is seen at a coffee warehouse of coffee company Simexco Dak Lak Limited in Di An town in Binh Duong province, Vietnam July 8, 2019. Picture taken July 8, 2019. REUTERS/Yen Duong/File Photo

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  • Asian Robusta Coffee to Boost Falling ICE Stocks
  • Coffee deliveries weigh on ICE robusta prices
  • Virtually no Asian coffee has been delivered to ICE since 2018

LONDON, Feb 8 (Reuters) – Traders plan to deliver thousands of tonnes of robusta coffee from Asia to Europe’s ICE futures exchange for the first time in more than three years – a move that could dampen prices from coffee benchmark that are close to ten-year highs.

The coffee was purchased after local prices in the Asian region crashed and global traffic jams eased.

ICE (ICE.N), which operates futures and stock exchanges around the world, operates in part as a market of last resort for surplus coffee, so any sign of an end to the relentless reduction in its stocks could ease investors’ worries about supplies, prompting them to sell .

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Traders shipped at least 18,000 tonnes of robusta coffee – more than a fifth of current ICE exchange stocks – from Vietnam and Indonesia in January, much of it destined for exchange-approved warehouses in Antwerp , Amsterdam and London, five sources at the world’s top trading houses told Reuters.

Vietnam is the world’s largest producer of robusta coffee, but stock markets are currently dominated by supplies from the second-largest producer of robusta coffee, Brazil.

Indonesia is the third largest producer of robusta.

Trading houses such as Ecom, Sucafina and Louis Dreyfus (AKIRAU.UL) ship the beans at relatively low freight rates because they use carriers known as breakbulk to export the coffee, the trade sources said, this which has not been seen for 25 years. .

Sucafina confirmed that it ships robusta from Vietnam in bulk carrier vessels. Louis Dreyfus declined to comment. Ecom was not immediately available for comment.

Trading houses bought the coffee after Vietnamese and Indonesian traders – desperate to move stocks built up over two years of shipping bottlenecks – offered beans at record prices relative to the benchmark futures price. of ICE robusta, the sources said.

Coffee is normally shipped on container ships, but rates have spiked due to a shortage of available capacity caused by restrictions to combat the coronavirus pandemic.

The restrictions have disrupted labor supply and caused increased demand for retail goods from consumers stuck at home.

Traders said it has become cheaper to stack bags of coffee in general cargo vessels, which are commonly used for goods that cannot fit in standard-size containers.

Ships have not been used to ship coffee for years because they require traders to ship very large shipments and because of the risks the quality of the beans could suffer if it rains while the bags are being loaded and unloaded. at the port.

GAME CHANGER

“Breakbulk is potentially a game changer. We are only tight because the coffee is in the wrong place,” said a Swiss-based coffee trader at a global trading house.

Breakbulk shipping rates dropped earlier this year to half of container rates on the Southeast Asia route to Europe, he said.

This, combined with the record discounts, prompted traders to buy the coffee, as they knew they would at least break even if they delivered it to the exchange, and would make a profit if they sold it. to roasters.

The delivery of robusta from Vietnam and Indonesia to the stock exchange has not been profitable for years.

ICE inventory data shows no significant robusta shipments from Vietnam since late 2018, and none from Indonesia for more than four years.

However, later this month, commodity trader Ecom plans to deliver 5,000 tonnes of Indonesian-sourced robusta to the exchange, according to a source with knowledge of the matter who was not authorized to speak to Reuters. .

This delivery is the minimum that will land on the stock exchange of Indonesia and Vietnam over the next month, traders said, with the actual figure likely to be double and expected to rise in the future.

At least three more breakbulk ships are expected to leave Vietnam later this month with robusta coffee that was bought at a discount to ICE futures, according to a senior Swiss-based trader at a global trading house.

“We expect robusta prices to average $1,950 per ton in the second quarter (vs. around $2,240 currently) helped by large harvests in Vietnam and Brazil and the ability to ship in bulk from a few routes. “said Carlos Mera, an analyst at Rabobank.

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Reporting by Maytaal Angel. Editing by Nigel Hunt and David Evans

Our standards: The Thomson Reuters Trust Principles.

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