Brazil's coffee exporter offsets volume loss with domestic sales

Coffee exporter Tristao based in Espirito Santo, Brazil's largest robusta state where trees were hurt by drought this year, is offsetting losses in exports with high price sales on the domestic market. Marcio Candido Ferreira, sales director for Tristao, one of Brazil's top 10 robusta exporters, said the trader moved roughly 900,000 bags of coffee in 2015, with 20 percent of that going to the domestic market.
"This year we expect to move only 600,000 bags," he said. "But the share of our business on the internal market is going to be larger now because prices are more competitive here." Brazil forbids the importation of green coffee, which has complicated business for the local soluble industry that is struggling to find robusta. The soluble industry, unlike roasters, has to use robusta to make instant coffee.
The drought and the protected market for green coffee drove prices for the normally cheaper robusta coffee to record levels of 550 reais per bag to put it on par with lower grade arabicas, Ferreira said. Roasters have been able to switch to arabicas during the robusta shortage, but the soluble industry has struggled, having to cut back on their sales abroad. Brazil is the world's largest exporter of coffee. Ferreira said prices for robusta currently at 470 reais a bag in the state were still very attractive to producers. Equivalent international prices for robusta are currently at 420-430 reais a bag. Ferreira said when Tristao realized there would be a sharp drop in the country's robusta crop earlier this year, it set out to buy as many beans as it could during harvest, while at the same time managing clients' expectations.
"We accelerated our physical buying and filled our warehouse as much as we could," he said. "Then we advised our clients of the situation so they could buy early if they needed to." Ferreira said the added carriage costs were compensated by the prices offered by the market. Favorable rains returned to the robusta regions of Espirito Santo in early November, which should lead to better yields from drought damaged trees in 2017 and 2018, Ferreira said. "Trees will still be recovering in 2017 but the ample rains and additional fertilizers will swell the size of the beans that are on the trees," he said. "The 2018 harvest will show a much bigger recovery though with more beans on trees."