Instant Coffee Exporter Turning Down New Orders

Posted on: 2017-01-31 11:31 AM

Brazil's Cia Cacique de Café Solúvel SA, the country's number one exporter of instant coffee, is refraining from closing export deals for future delivery due to uncertainty over robusta coffee supplies and fears it will lose market share to rivals in other countries.

Cacique's export sales director Pedro Guimarães Fernandes told Reuters on Monday that Brazil's robusta supply crisis is 'very severe' and that without an opening to imports soluble shipments will start to plunge soon.
 
"By this time I should be closing deals for May shipment, but I'm not," said Fernandes. "I can’t close a deal if I don't know if I will have enough raw materials to produce," he said.
Brazil is the world's largest producer and exporter of green coffee and also the number one shipper of instant coffee. While there are no problems with green coffee shipments, since the arabica crop was a record in 2016, the soluble coffee industry is suffering from a sharp reduction of robusta production due to two years of drought in the top robusta state Espírito Santo.
 
Arabica coffees are usually used to produce ground roasted brands, while instant coffee is typically made from the robusta.  Brazil produced a record 42 million 60-kg bags arabica crop in 2016, but robusta output fell to 8 million bags, the smallest since 2004.

"The current level of robusta stocks is derisive. It would hardly supply the industry for more than two months," said Fernandes, who also heads Brazil's soluble coffee association Abics.

Brazil's government projected current robusta stocks at 2.14 million bags recently.
Brazil does not allow coffee imports because they could expose local coffee fields to diseases.
 
Instant coffee makers are trying to convince the government of the necessity of importing robusta. Officials in Brasilia are still evaluating the issue, said the Agriculture Ministry on Monday.
 
Fernandes says the instant coffee industry is also asking coffee producers, who historically oppose any opening to imports, to change their stance and consider a temporary importing window.
 
He says that if the industry loses market share abroad. It will be bad for producers as well since that could reduce demand for their coffee in the future.
The Cacique director said that Brazilian instant coffee makers are likely to import robusta from Vietnam if the government decides to allow a temporary import window.