Commodities

Coffee cup ‘brimmeth over’, worries Brazil

Bloomberg September 17 | Updated on September 17, 2020 Published on September 17, 2020

Trucks may have to wait around three days to unload, even with the warehouse running two hours extra each day   -  REUTERS

Trucks wait outside warehouses for days to unload cargo collected from a record crop

Brazil has an unprecedented coffee problem — too many beans and nowhere to store them.

Warehouses in the world’s largest coffee exporter have never been so full, and trucks in Brazil’s coffee heartland are waiting days to unload cargo collected from a record crop during a time when global demand is waning.

The issue has come to a boil in Franca, about a five-hour drive north of Sao Paulo, where about 90 trucks brimming with coffee are stuck in line outside a warehouse operated by Dinamo.

“Just two days ago, it was 40 or 50 trucks,” Luiz Alberto Azevedo Levy Jr., a director at Dinamo, said in a phone interview. We are very close to our maximum capacity.

Trucks may have to wait around three days to unload, even with the warehouse running two hours extra each day and also on weekends. Similar lines are plaguing Dinamos unit in Machado and other warehouses in Mina Gerais and Sao Paulo states, Brazil’s top coffee producing states.

The warehousing crunch comes after farmers — encouraged by higher prices in local currency — sold most of this years harvest just as the pandemic shuttered restaurants, coffee shops and cafeterias across the globe, curbing consumption.

“Demand for coffee remains weak, and speculation is that private warehouses are full even in the US,” said Nick Gentile, managing partner for New York-based NickJen Capital Management. Global stockpiles will climb 18 per cent in 2020-21 to a six-year high, according to the US Department of Agriculture.

“Major cooperatives in Minas Gerais south are storing beans in silo bags outside depots to meet demand,” Regis Ricco Alves, a director at consultant firm RR Consultoria Rural said. “Truckers are charging double to deliver beans due to long wait times,” he said. Farmer sales hit an all-time high this year, reaching 60 per cent of a harvest that’s estimated at 68.1 million bags, according to consulting firm Safras & Mercado. Some 41 million bags have been delivered to buyers, with most heading to trading warehouses.

Declining exports

“Still, Brazilian coffee exports declined since the start of the season in July due logistical issues including limited availability of containers,” said Carlos Alberto Fernandes Santana, a director at Empresa Interagricola SA, a unit of trader Ecom Agroindustrial Corp.

“Delays are already surpassing 15 days and they are asking for one more week to take the coffee from our warehouses,” he said in an interview. “New contract sales are halted, unless the seller has warehousing availability to store beans for more than 10 to 12 days.”

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Published on September 17, 2020
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