NYSE Liffe will implement new rules to accelerate warehouse deliveries of robusta coffee traded on the exchange in London after companies including Armajaro Trading Ltd. complained about delays.
Warehouses storing as much as 30,000 metric tons will have to deliver at least 250 tons per working day, the exchange said in a notice dated June 22. Those holding more will have to deliver 500 tons a day. The changes will become effective with the delivery of the September contract, which expires Sept. 28. A “surprisingly low” rate of deliveries was curbing the industry’s access to inventories, London-based broker Marex Spectron Group said in a report in November.
“It seems exaggerated to jump from 250 tons a day to 500 tons a day but we’ve been aware that the changes would happen for some time and we will comply with the rules,” Antonio Garcez, chief executive officer at Pacorini Group, owner of warehouses that store coffee, said today by phone from Trieste, Italy. “At the moment, it doesn’t make a difference for most as only two warehouses have more than 30,000 tons.”
The European Coffee Federation, whose members include Kraft Foods Europe Ltd. and Sara Lee Corp., wrote to NYSE Liffe last year to discuss delivery speeds, according to Roel Vaessen, the secretary general of the group. Warehouses usually keep deliveries to 200 tons a day, he said.
The delays resulted in Armajaro, a London-based supplier of sugar, cocoa and coffee, lodging a complaint with the competition authority in Belgium against Port Real Estate NV, owner of the Wilmarsdonk warehouse in Antwerp.
The adoption of minimum load-out rates is “a step in the right direction,” said Angus Kerr, owner of trading company Coffee ag in Cobham, England, and a member of the logistics committee of the British Coffee Association. The European Coffee Federation considered the move “a very positive development,” Vaessen said in an e-mail response to questions. He added that the coffee group would continue to monitor the implementation of the rules “with great interest.”
“I imagine industry will continue to hammer on Liffe’s door to get warehouses to increase the load-out rate,” Coffee ag’s Kerr said. “It is financially beneficial for warehouses to store for Liffe so any increase on the movement out should be able to be accommodated.”
The delivery rates will apply to certified robusta coffee to be transported for use as well as to the transfer of beans between depots, NYSE Liffe said. Movement of beans to be used will be prioritized over warehouse transfers, it said. Any order to load out shall be made in writing, according to the notice.
The introduction of delivery rates may raise costs for warehouse keepers, according to Pacorini’s Garcez.
“If demand in the market continues as it is now, costs for warehouse keepers may increase as more employees could be needed,” Garcez said.
“When you consider the situation where a warehouse contains 30,000 tons of coffee, it could take 120 days, or 4 months, to remove all the coffee,” said Jonathan Parkman, co-head of agriculture at broker Marex Spectron. “That does not seem be commensurate with the concept of delivery periods.”
Minimum movement delivery rates for cocoa will be introduced “in due course and published by notice,” NYSE Liffe said in the notice.
“The issue has been greater in coffee than in cocoa in the past,” Parkman said.