October 04, 2012
Coffee imports start to percolate at port again
The Houston Ship Channel’s identity may be wrapped up in oil, the most heavily traded commodity in the world, but it’s also a top transit point for the second-most traded commodity on Earth: coffee.
And the amount of beans pouring into the Port of Houston – most of them “green,” or unroasted – appears to be picking up after slipping in recent years as the price of coffee has escalated.
In May 2011, the benchmark price for green Arabica coffee reached $3.05 per pound, its highest in more than 30 years. It is now trading at well below $2 per pound.
“There was not much coffee coming to any port in the world, but now we finally see the exchange volumes coming up again,” said Maria Escheverry, general manager of Cadeco Industries, which operates the largest of three green coffee exchange warehouses in Houston.
Leo Vasquez, executive vice president of Houston-based Maximus Coffee Group, which operates one of North America’s only three decaffeination plants in east Houston, likened $3.04 per pound to oil hitting $150 a barrel.
Consequently, local imports and coffee stockpiles have waned in recent years after a boom spurred by Houston’s long-sought designation in 2003 as a green coffee exchange port – only the fourth in the U.S., after New York, Miami and New Orleans.
Certified for storage
The certification by the Intercontinental Exchange, which controls the trade of Arabica beans, allowed the port to store raw beans for trading purposes. It required voter passage of a tax exemption that permits the beans to be stored in Houston warehouses tax-free before processing.
The designation led to a spike in both the amount of green exchange coffee stockpiled at the port and the overall coffee imports as growers and buyers chose to ship more beans through Houston.
But high prices in the past two years, sparked by poor crops in producing countries, weakened global demand and blunted the local boom.
Industry officials point to recent signs of a turnaround and are hopeful that the 2015 opening of a wider Panama Canal, which is expected to divert some Asian trade from the West Coast to the Gulf and East coasts, will add buzz to the coffee business in Houston.
After the exchange certification, the number of bags of coffee moving through the port – at 152 pounds per bag for exchange beans – grew to 800,000 bags a year, from 150,000 a year previously.
The port’s three certified warehouses began receiving exchange coffee in April 2005. By the following April, the amount of green coffee stored here had increased 30-fold. It grew exponentially until 2010, when prices soared and stockpiles began to slide as imports and storage decreased.
Overall coffee imports into Houston dropped off in fall 2008 and have not yet rebounded, Commerce Department data show.
Judith Ganes Chase, a soft commodities analyst and consultant, said the volume of coffee coming into most ports diminished the past two years because of a shortfall of mild Arabica coffee following excessive rains in producing countries.
“If there’s shortfall in coffee, then people are just buying it immediately (and) there’s no need to keep it in storage,” Chase explained.
Those coffee-producing countries where weather has impacted crops include Brazil – No. 1 in the world – Colombia, Guatemala, Costa Rica, Ethiopia, Kenya, Vietnam and Indonesia. The latter two are the largest suppliers of Robusta coffee, which Chase said has become more common in the U.S. as the price of Arabica has increased.
At the Port of Houston, stockpiles of exchange coffee have grown for the past five months, according to the Intercontinental Exchange. (Other than Cadeco, the other local green coffee exchange warehouses are operated by Gulf Winds International and Dupuy Storage Houston LLP).
Overall imports into Houston rose from February through May, but dropped off again in June.
In May, Houston for the first time surpassed New Orleans in the volume of exchange coffee stored.
Keeping eyes on Brazil
Chase said coffee stockpiles have crept back up as prices have fallen, but the market near-term will depend largely on the crop in Brazil, which is going through a “mini dry spell.” Prices are already rising, she said.
The price of coffee on Wednesday closed at $1.81 per pound, slightly higher than the average prices of recent months.
John Moseley, general manager of trade development at the port authority, said developments like the Panama Canal expansion could be a buffer from market fluctuations as more entities shipping Robusta from Asia send it to the eastern U.S. rather than to the West Coast.
“This Panama Canal expansion is going to allow larger ships, which basically drives down the price per unit cost of ocean freight between Asia and Houston,” Moseley explained.
That, he said, makes the product much more competitive in the local market. “Hopefully, we’ll see that develop further.”
‘ll see that develop further.”