HOUSTON: Global coffee traders and roasters say they have slashed their purchases to minimal levels, as the industry reels from a steep surge in prices that suppliers have yet to convince retail stores to accept.
At the US National Coffee Association annual convention in Houston this week, attendees said they have been in shock at a 70 percent increase since November for Arabica coffee futures on the ICE exchange, the benchmark for coffee deals around the world.
Renan Chueiri, director general at ELCAFE C.A. in Ecuador, said this year is the first time the instant coffee maker hasn’t sold all of its expected annual production by March.
“We would usually be sold out by now, but so far we sold less than 30 percent of production,” he said. “The big price increase eats clients’ cash flow, they don’t have all the money to buy what they need.”
The coffee price hikes have stemmed from lower production in important coffee growing regions, particularly in top grower Brazil, reducing the availability of beans.
“Nobody wants to be exposed, nobody is buying for future delivery, it is all hand to mouth,” said one coffee broker, asking not to be identified due to the sensitivity of the issue.
By “hand to mouth,” he was referring to the practice of buying only what is necessary for the moment and eschewing stockpiling.
Many recent deals in Brazil, he said, have been conducted in a very conservative manner.
“You close a deal, and then you have seven days to go to the farm or warehouse and get your coffee. You check the quality, and if it is ok, you make the payment on the site and drive away with the coffee.”
A recent Reuters poll predicted that Arabica coffee prices could fall 30 percent by the end of the year, as high prices curb demand and early signs point to a bumper Brazilian crop next year.
But until prices drop significantly, much of the coffee industry could be in for a world of pain.
A chief executive of a major roaster in the United States — the world’s largest market for coffee consumption, said some of his clients are not sure they can continue to be in business.
“They don’t know if they will be able to sell their product at the new prices,” he said, also asking not to be identified. “Some people are going down.”
The CEO said supermarkets and grocery stores had been pushing back against the higher prices asked by roasters. Negotiations were taking a long time and some retail outlets were starting to be short of coffee on the shelves.
“It has been a nightmare,” he added.
Coffee warehouses close to ports in the US, which receive beans coming from Central and South America, currently have half their normal volumes, said an executive for one of the largest companies in the storage sector.
“Some storing companies are returning silos to the owners, canceling leasing contracts early,” he said.
Michael Von Luehrte, owner of broker MVLcoffee, said the coffee market, particularly on the trading side, could see consolidation.
Companies with more capital will be able to increase trading volumes, while others will suffer with reduced financing, he added.
Commodities trader Louis Dreyfus said in a presentation during the conference that the coffee planted area has been expanding in reaction to the higher prices.
Expansion has happened in countries such as India, Uganda, Ethiopia and Brazil. The company believes that if Brazil manages to have one big crop, then that in combination with the new planted areas could lead to a collapse in prices.

FLORIDA: A suspected thief gulped down two pairs of diamond earrings during his arrest on the side of a Florida Panhandle highway last week, detectives say, leaving them with the unenviable task of waiting to “collect” the Tiffany & Co. jewelry worth nearly $770,000.
An X-ray of the suspect’s torso showed what the Orlando Police Department believed to be the diamond earrings — a white mass shining brightly against the grey backdrop of his digestive tract.
“These foreign objects are suspected to be the Tiffany & Co. earrings taken in the robbery but will need to be collected ... after they are passed,” the department’s arrest report said. Handwriting on an order of commitment document filed Monday said “outside medical,” suggesting he was at a medical facility.
The 32-year-old man from Texas is accused of forcibly stealing the earrings from an upscale Orlando shopping center last Wednesday.
Orlando police spokeswoman Kaylee Bishop said Wednesday she was checking with the lead detective on whether the earrings had been recovered yet. The earrings’ status also wasn’t known to a deputy who answered the phone but wouldn’t give his name in the rural Panhandle county where the suspect was arrested near Chipley, Florida.
During the theft, the man allegedly told Tiffany sales associates he was interested in purchasing diamond earrings and a diamond ring on behalf of an Orlando Magic basketball player. Sales associates escorted the man to a VIP room where he could view the jewelry. A short time later, he jumped out of his chair, grabbed the jewelry and tried to force his way out of the door.
One of the sales associates was injured trying to block him but managed to knock the diamond ring, valued at $587,000, out of his hands.
Detectives obtained the license plate of the suspect’s car through shopping mall security footage and believe he was driving back to Texas. State troopers tracked the car from tag readers on the Florida Turnpike and Interstate 10 until he was pulled over for driving without rear lights in Washington County, almost 340 miles (550 kilometers) away, the Orlando police report said.
As he was being taken into custody, he swallowed several items troopers believed were the earrings.
The suspect was charged with first-degree felony grand theft and robbery with a mask, a third-degree felony. Court records showed no attorney for him, and he was listed as being in police custody in Orange County Florida, which is home to Orlando, as of Wednesday morning.