By Maytaal Angel

LONDON (Reuters] – Traders will deliver thousands of tons of coffee from Asia to Europe at the ICE (NYSE.) Futures Exchange in Europe. It is a move that could reduce the pressure on benchmark coffee prices, which have been hovering near their 10-year highs.

After local coffee prices dropped in Asia and the global shipping jams were eased, it was decided to buy the coffee.

ICE is a global exchange that runs futures and equities. It functions partly as a market for coffee excesses. Investors may be less worried about supplies if there are signs of ICE’s constant drawdown.

According to five top sources, Reuters reported that traders shipped more than 18,000 tonnes worth of coffee from Vietnam and Indonesia. This is equal to over a fifth of ICE current stocks.

Vietnam is the top-producing country of robusta coffee in the world, but current exchange stocks are dominated by Brazil’s number two producer.

The third-largest producer of robusta is Indonesia.

According to trade sources, Ecom, Sucafina, and Louis Dreyfus ship the beans at very low freight rates. They use breakbulk carriers, which are used for exporting coffee. This is something new in 25 years.

Sucafina stated that it ships robusta from Vietnam via breakbulk vessels. Louis Dreyfus did not respond to our request for comment. Ecom could not be reached immediately for comment.

Sources said that the trade houses acquired the coffee when Indonesian and Vietnamese dealers were desperate for stock to shift after two years of shipping delays.

Coffee ships on containers, but prices have skyrocketed due to the shortage of container vessel capacity caused by coronavirus pandemic.

Restrictions on labour supply caused an increase in consumer demand for goods at retail from people who were not at home.

Traders stated that it was cheaper to stack bags of coffee into breakbulk vessels. They are used commonly for goods that don’t fit in standard-size containers.

Because traders need to ship large cargoes, and to reduce the risk of bean quality being affected by rain, these vessels have not been used to ship coffee in many years.

GAME CHANGER

Breakbulk could be a game-changer. A Swiss coffee trader told a global trade company that they are only in tight spots because their coffee was not at the right place.

He said that breakbulk shipping costs fell to half the rate of container prices on the route from south-east Asia and Europe earlier in this year.

This, combined with record-breaking discounts, prompted traders and brokers to buy the coffee. They knew that they would break even if the exchange received it, but make a profit if the roasters sold it.

For years, it has been difficult to deliver robusta from Vietnam or Indonesia to the Exchange.

ICE stock data indicates that there have been no substantial deliveries of robusta to Vietnam from late 2018 and from Indonesia for more than 4 years.

However, Ecom will deliver 5,000 tons of Indonesian-origin robusta to the Exchange later this month, according to a source who is not authorized to talk to Reuters.

This delivery represents the minimum amount that the Indonesian and Vietnamese exchanges will receive over the coming month. However, traders indicated that the real figure is likely to be twice that. They expect that the market will pick up in the future.

According to a Swiss-based senior trader, at a global trading house, at least three additional breakbulk vessels will leave Vietnam this month. They are carrying robusta coffee, which was purchased at a discounted price to ICE futures.

Carlos Mera, a Rabobank analyst, stated that robusta prices average $1,950 per tonne for the second quarter, compared to $2,240 currently. This is due in part to large cropping in Vietnam and Brazil, as well as the ability of shipping in bulk via a few routes.