By May Angel and Marcelo Teixeira
LONDON/NEW YORK, Sept 11 (Reuters) – Traders are planning to deliver significant volumes of arabica coffee from the world’s biggest producer Brazil to ICE exchange warehouses, where stocks have sunk to 26-year lows and driven up prices, dealers, brokers and analysts with knowledge of the matter said.
The arabica coffee contract run by ICE Futures U.S., which acts as a global benchmark for pricing coffee, hit a six-month high in July above $3.5 per lb. It has stayed close to that level despite market expectations of a substantial surplus in the 2026/27 season.
Industry analysts say the main reason for the sustained high prices, still around $3 per lb, is the low level of ICE arabica stocks, about 70% of which are held in Antwerp, Belgium.
The shipments from Brazil have the potential to more than double ICE certified stocks, which have a major influence on prices as a clear measure of how much surplus coffee is available for delivery to the exchange.
Many algorithm-driven funds are programmed to sell automatically when exchange stocks rise and to buy when they fall.
HUNDREDS OF THOUSANDS OF BAGS COULD BE ON THE WAY
Two sources said trade major Olam is seeking to certify 150,000-200,000 bags at the exchange in time for delivery against the December futures contract.
Louis Dreyfus Company, another trade major, is attempting to do the same, said a third source.
LDC and Olam declined to comment.
The sources declined to be named because they were not authorised to speak publicly.
Following harvest delays and problems linked to extreme weather, ICE certified stocks have fallen to under 220,000 bags compared with a range of between 1 million and 5 million bags from the mid-2000s until early 2022.
The 300,000 or so bags of expected deliveries would not increase stocks to the 1-million-bag level that traders consider comfortable. They are, however, expected to weigh on prices, a fourth source at an agri-commodities trade major said.
SHIPMENTS TO BELGIUM ARE A GAUGE OF OVERALL SUPPLIES
Traders and industry analysts tend to view higher-than-usual shipments to Belgium as a signal that excess supplies — over and above roaster needs — are headed for the exchange.
An analyst at a coffee trade major estimated that about 150,000 bags of arabica out of the total August coffee shipments from Brazil are surplus to average roaster needs and so likely to head for the exchange.
More shipments are due in September, he said.
Brazil’s coffee exports to Belgium rose 245.3% year-on-year in August to 31,500 metric tons, or more than 525,000 60kg bags, according to government data analysed by Brazilian broker Terra Investimentos.
Already, more than 62,000 bags of Brazilian coffee have arrived at exchange depots and await grading or quality controls so they can be certified as tradable against ICE December futures, exchange data shows.
It is unclear what proportion will successfully pass the checks.
The ICE exchange functions in part as a market of last resort, or guaranteed buyer of excess coffee, so any sign its stockpiles are rising can prompt investors to bet on price falls.
(Reporting by May Angel and Marcelo Teixeira; editing by Barbara Lewis)
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