Brazilian Coffee Makers Rule Out Repatriating Robusta Beans

By Fabiana Batista and Isis Almeida (Bloomberg) — Instant-coffee makers in Brazil, squeezed by record prices following a decline in domestic bean production, abandoned a plan to bring back robusta beans stored in other countries because the process to allow their repatriation would take too long. The manufacturers, who mostly use robusta, were “seriously” studying the possibility, according to Aguinaldo Jose de Lima, director of institutional relations at Abics, a group representing Brazil’s soluble-coffee industry. Bringing back the beans would require a pest-risk analysis and a change in the law, he said in a telephone interview Friday.

A second year of drought in Brazil’s robusta-growing areas has reduced output by 25 percent to the lowest since 2004. The country, the largest producer of all coffee varieties, has tough sanitary restrictions on bean imports that deter inbound shipments. Instant-coffee makers stopped signing new sales agreements in September as they can no longer guarantee they will have enough raw material supplies, Abics said earlier this month.

The Agriculture Ministry’s department of plant health told Abics a pest-risk analysis would be required in cases where Brazilian beans are repatriated, according to Lima. Eduardo Porto Magalhaes, a ministry official, confirmed that government received Abics’s request and that the pest analysis is required in this cases. “A change in legislation would still need to happen after that to allow re-imports,” Lima said. Speculation that Brazil may allow imports spurred a widening last week in the spread between futures contracts in London, as such a move by the government could lead to a drawdown of stockpiles monitored by ICE Futures Europe.

The January robusta contract closed on Nov. 18 at a premium of $36 per metric ton to March futures, compared with an $8 discount a week earlier. There are currently 137,140 tons of certified robusta in warehouses monitored by ICE Futures Europe in London. While it’s not possible to know how many bags are from Brazil, all the beans that changed hands when the January, March, May and July futures expired were from the nation, data on the exchange’s website show. In September, 83 percent of the beans delivered were from Brazil. Robusta coffee prices in Espirito Santo, climbed to a record 552.28 reais ($163) a bag on Nov. 14, according to Cepea, a University of Sao Paulo research group. Producers, coffee makers and the government have also had talks over whether it would be possible to allow imports of robusta beans so that they can be processed and then exported. The National Coffee Council, a producer lobby group known as CNC, is reluctant to support the measure because it could hurt local producers, it said in a Nov. 18 statement. Brazil’s government will only consider allowing imports when coffee producers and the processing industry reach an agreement, Neri Geller, the policy secretary at the Agriculture Ministry, said by phone. Attempts to import coffee into Brazil are unusual but not unprecedented. In the 1980s, there was an attempt to bring back 600,000 bags of Brazilian beans certified by the London bourse, said Guilherme Braga of the Chamber of Coffee Commerce in Rio de Janeiro. The move was opposed by producers and the government suspended the measure, with only 50,000 bags reaching Brazil. To contact the reporters on this story: Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net; Isis Almeida in London at ialmeida3@bloomberg.net To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net Phoebe Sedgman

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