World's top instant-coffee shipper targets South-east Asian market

[SAO PAULO] Brazil, the world's largest shipper of instant coffee, is boosting its exports to South-east Asia, targeting local rivals there that include top producer Vietnam.

Through November, Brazil exported 4.4 per cent more soluble coffee to the region than in all of 2018. A bumper crop of robusta beans, used in instant coffee rather than the more costly arabica beans, and the devaluation of Brazil's currency has given the country's exports a cost advantage over the last year and a half.

When 2019 began, Brazil's raw material for instant coffee was priced at about 5 per cent below Vietnam's prices. Since then, the spread has grown to about 15 per cent, according to Pedro Guimaraes, president of the instant coffee trade group Abics.

"The industry won't stop for maintenance at this year's end as it usually does," said Mr Guimaraes, who is also commercial director at Cia Cacique de Cafe Soluvel, a Sao Paulo-based instant coffee producer. "Export demand has been warming due to the South-east Asia market."

Vietnam, the world's largest producer of robusta coffee, has seen its exports decline by 3 per cent between 2018 and 2019.

Meanwhile, Brazil, already the king of arabica coffee, is poised to take over the top spot for robusta beans, according to Carlos Mera, a London-based analyst for Bankbook International, known for its agricultural research.

Brazil's producers are rapidly adopting new technology that can help boost production, Mr Mera said.

In Brazil's Rondonia state, plantings of new robusta tree varieties are churning out annual yields of 200 bags to 300 bags per hectare, Mr Mera said. Ample irrigation is also boosting output. Meanwhile, an aging Vietnamese tree population is keeping average yields close to 50 bags per hectare, he said. A bag weighs 60kg.

South-east Asia accounts for about 20 per cent of Brazil's instant coffee shipments. Indonesia and Myanmar are Brazil's biggest instant-coffee customers in Southeast Asia, according to Abics. Since 2017, the volume of instant coffee shipped to these two nations jumped more than 30 per cent and 180 per cent, respectively.

To all destinations, Brazil is projected to ship 4 million bags this year, topping the previous record of 3.9 million bags tons in 2016, according to Abics.

BLOOMBERG