In South America’s Andes, farmers pray for rain to end drought

By Monica Machicao

TIHUANACU, Bolivia (Reuters) – High in the mountains of the Bolivian Andes, farmer Alberto Quispe has one thing on his mind: rain.

In the rural area of Tihuanacu, around 100 kilometers (62 miles) south-west of highland city La Paz, locals say there has been little rain this season during a dry spell across the Andean regions due to a third straight La Nina weather pattern.

“When we raise our hands, we ask God to forgive us our sins and to ask for rain for our crops, because in the fields we don’t have water, nor for the cattle,” said Quispe, who climbed into the hills with community members to pray for rain.

Around Bolivia, many areas have declared an emergency due to the drought, which Bolivia’s National Meteorology and Hydrology Service expects will last until 2023, when the intensity of the La Nina is expected to wane. The drought has hit crops in Bolivia as well as in Argentina, Paraguay and Peru.

Quispe and others climbed Lloco Iloco hill with their evangelical shepherd to ask for rain from both God and the local indigenous Aymara mountain deities, or Achachilas, raising hands to the skies while on their knees.

Just across the Bolivian border with Peru, the situation in similar.

“The sun is burning, it’s very strong, one can’t even walk anymore, the heat in the countryside is even worse, and we don’t have water either,” said Rosa Sarmiento from Desaguadero in Peru near the banks of the mighty Lake Titicaca.

“All the people are very worried.”

In the Andean regions, drought in recent years has caused falling water reservoir levels in places like Chile and led to important glaciers retreating. Drought has hit crops like wheat and soy, including this year in major grains producer Argentina.

In the village of Zapana Jayuma in Bolivia, the arid fields show clear signs of heat damage.

“The land is very dry and we have not been able to plant potatoes, broad beans, or yams,” said Cecilia Aruquipa, community manager in the area.

“The heat is very strong and burning, we can no longer bear it, that is why we all go where there is shade because the heat is so intense.”

(This story has been refiled to fix typographical error in the last paragraph)

(Reporting by Monica Machicao; Writing by Adam Jourdan; Editing by Josie Kao)

Brazil announces more names for govt transition in environment, agriculture

BRASILIA (Reuters) – Brazil’s Vice President-elect Geraldo Alckmin, who is coordinating the government transition process on behalf of President-elect Luiz Inacio Lula da Silva, announced on Wednesday more names for the team in areas including agriculture and environment.

As speculation mounts on who Lula will choose to form his cabinet, three former ministers in previous administrations of his Workers’ Party were announced for the environment group. Three other former ministers close to rural producers were tapped for the agriculture group.

While Lula attends the COP27 climate summit in Egypt, his first overseas trip since defeating far-right incumbent Jair Bolsonaro in October, Alckmin announced that former environment ministers Marina Silva, Izabella Teixeira and Carlos Minc would participate in the transition process.

Silva and Teixeira are with Lula at COP27, where the president-elect seeks to deliver a message that “Brazil is back” in the fight against global warming.

As Lula also looks to re-build connections with agribusiness, a key constituency for Bolsonaro in his unsuccessful re-election bid, people close to the sector were also announced for the transition.

Former agriculture ministers Neri Geller, Katia Abreu and Luis Carlos Guedes will take part, Alckmin told reporters, as well as Senator Carlos Favaro and Evandro Gussi, the head of local sugarcane industry group Unica.

The mining and energy group will include names such as Senator Jean Paul Prates, a strong candidate to head state-run oil company Petrobras next year, and Mauricio Tolmasquim, a professor at the Federal University of Rio de Janeiro, the vice president-elect added.

(Reporting by Bernardo Caram; Editing by Angus MacSwan)

Food prices to edge down in 2023 as recession looms – Rabobank

By Maytaal Angel

LONDON (Reuters) – Prices for agricultural commodities like coffee, feed grains and oilseeds could dip next year as many major economies enter recession, but they will remain high in historic terms, Rabobank said in a report on Wednesday.

The bank said consumers face a darkening macro-economic picture, with energy shortages, geopolitical danger and ongoing shortages of some key commodities like wheat boding ill for global food security.

Wheat remains acutely affected by the Russia-Ukraine war and the bank sees a 6 million tonne deficit next year, thanks also to uncertain weather prospects in the European Union, the United States and Argentina.

Elsewhere, Rabobank sees coffee demand growing well below average levels at 1.5%, with benign weather leaving the market in a 4 million bag surplus. It sees relatively low sugar prices meanwhile thanks again largely to benign weather.

“Agricultural prices might recede (yet) that’s not because production will improve significantly but because demand is set to be so weak,” said Carlos Mera, the bank’s head of agricultural commodities market research.

With energy, labour and other costs surging, agricultural commodity prices are about 50% higher than pre-pandemic times, the bank noted.

(Reporting by Maytaal Angel; Editing by Kirsten Donovan)

Cotton set for worst day since October on dollar rebound

(Reuters) – ICE cotton futures fell as much as 3.5% on Monday, and were set for their biggest drop in eleven sessions, as a bounce-back in the U.S. dollar dented overseas demand for the natural fiber.

* The most-active cotton contract for March fell 2.68 cents, or 3.1%, to 83.65 cents per lb at 12:50 ET (17:50 GMT) after shedding as much as 3.5% to 83.33 cents a lb, which could be its worst day since Oct. 28.

* “I don’t see a whole lot that would move this market other than technical factors and the dollar,” said Jon Marcus, president of Lakefront Futures and Options brokerage in Chicago, who saw 86.50 cents per lb as “a spot that’s been troublesome for cotton.”

* “If the dollar breaks, that might give the buyers a little bit of courage in here but… cotton at 80 cents and above is a pretty good level historically.”

* The dollar index rose 0.6%, making U.S. cotton more expensive for holders of other currencies.

* Also weighing on sentiment, Wall Street’s main indexes slipped as hawkish comments from a U.S. Federal Reserve official tempered hopes of the central bank toning down its aggressive monetary policy approach.

* “What you’re going to see the next couple of days, especially this week… cotton will probably be the other side of the coin, depending on what the dollar does, and we’ll take it from there,” Marcus said.

* Chicago corn, wheat and soybeans edged lower, curbed by a rebound in the dollar and renewed doubts about Chinese demand.

(Reporting by Deep Vakil in Bengaluru; Editing by Shailesh Kuber)

Ukrainian farmers turn to UN-supplied grain sleeves to save their business

KYIV (Reuters) – On a crisp and sunny November morning, Ukrainian farmers lined up to collect U.N.-supplied grain sleeves to store crops over winter as the country faces a significant shortage of storing capacity caused by Russian shelling.

Ukraine has said it may lack up to 15 million tonnes of regular grain storage capacity this season to store its 60 million- to 65 million-tonne grain and oilseed harvest after a large number of silos were destroyed or damaged during the hostilities.

The United Nations Food and Agriculture Organisation (FAO), says it has secured over 30,000 bags which will help to alleviate the storage deficit by 6 million tonnes. Over 7,500 bags have already been given to 356 farms.

Nearly 1,500 farms across Ukraine are being given the sleeves. Each of them can hold around 200 tonnes of grains for up to nine months.

The sleeves, which are 60 metres (197 feet) long and 2.7 metres (8.9 feet) wide, are loaded by a machine which slowly stretches the bag out across the ground while pouring in grain which comes from a separate trailer.

Local grain prices have fallen after Russia’s Feb. 24 invasion of Ukraine, and Ukrainian farmers say they face difficulties exporting and high costs because of power outages after Russian missile and drone attacks on energy facilities.

“We are trying to encourage (farmers) to keep the grain and wait for a better price… This is important for their economy, they need money,” said the FAO’s spokesperson in Ukraine, Viktoria Mykhalchuk.

Volodymyr Tsekhmister, who tends 2,000 hectares (4,940 acres) of land in the Kyiv region, said he was picking up 76 bags to store corn, as low market prices were forcing him to wait.

“At this time in previous years, we would have fully sold (our crops), but today a very high percentage of our production is not yet sold… Last year’s harvest still hasn’t been sold,” he said.

Lyudmylla Martyniuk, director of another farm Kivshovata Agro, which tends 2,300 hectares (5,680 acres) of land in the Kyiv region, echoed these sentiments while collecting 39 bags to store corn.

“Prices for diesel, petrol and spare parts have grown, while prices for our produce, for wheat, corn, they have decreased significantly,” she said.

(Reporting by Max Hunder; editing by Jonathan Oatis)

Cotton slides on USDA’s one-two punch from low demand, high U.S. crop view

(Reuters) – ICE cotton futures turned negative to slide as much as 4% on Wednesday, after the U.S. Department of Agriculture (USDA) in its monthly report showed bigger-than-expected U.S. production and lower global demand estimates.

Cotton contracts for December fell 1.5 cent, or 1.7%, to 86.18 cents per lb at 1310 ET (1810 GMT) having shed as much as 4% at 84.19 cents a lb after USDA’s monthly World Agricultural and Supply Demand Estimates (WASDE) report.

“All in all, this report is trying to show the current reality of the market, both on the supply and the demand side, with the latter being the one that could come back at any point, unlike production,” said Valentin Olah, cotton risk management consultant at StoneX Group.

The USDA report saw U.S. ending stocks 200,000 bales higher at 3 million bales, which Olah said was surprising and “softens a bit the tightness of ending stocks, for now.”

“Production (in the U.S.) is 1.5% higher, at 14.0 million bales, as a decrease in the Southwest is more than offset by increases elsewhere,” the WASDE report said.

The report dealt a second blow to prices by cutting global consumption estimates, seeing fewer cotton shipments to major importers Bangladesh and China.

USDA also slashed its forecast for the world’s cotton output by 1.6 million bales, citing a diminished crop due to unusually heavy rainfall in Pakistan, Australia and West Africa.

The dollar advanced against several major currencies, making U.S. cotton more expensive for overseas buyers.

(Reporting by Deep Vakil in Bengaluru; Editing by Shailesh Kuber)

Argentina’s reserves under pressure again after soy export bonanza ends

By Jorge Otaola

BUENOS AIRES (Reuters) – The Argentine central bank’s already depleted reserves are coming under renewed pressure, as grains exports from the South American nation have stalled following a soybean sales bonanza and a drought that is hitting wheat and corn.

The country’s central bank sold some $150 million on Monday, the largest daily fall in reserves since early August, traders told Reuters, adding to drops of some $368 million last week and $72 million the week before. It sold $145 million on Tuesday.

A government-spurred soybean export push in September helped bring in some $5 billion in hard currency reserves for the country, which sorely needs dollars to make future payments to the International Monetary Fund (IMF) and private creditors.

Amid a slowdown in grains sales for the world’s top exporter of processed soy and No. 3 corn exporter and continued demand for dollars among importers, the central bank has already given up around one-fifth of those gains, data collated by Reuters show, despite tighter measures to defend reserves.

Argentina: building reserves? https://graphics.reuters.com/ARGENTINA-ECONOMY/egpbkoralvq/chart.png

“The picture is getting more complicated as supply (of dollars) falls and demand does not give up, despite greater exchange restrictions and differential exchange rates,” local clearing agent Cohen said in a note.

“The exchange rate tension returned earlier than expected.”

Argentina is facing a major and protracted drought, and recent frosts hammered wheat harvest forecasts and forced farmers to delay planting of soy in the country’s core farm belt region, risking billions of dollars in potential losses.

Inflation is also heading towards 100% this year, while pressure has also been rising on the local peso currency, with increasing numbers of parallel exchange rates far removed from the official spot rate raising expectations of a devaluation.

“At some point the devaluation jump will take place, but the political context must be taken into account,” said economist Juan Carlos De Pablo, referring to general elections next year.

(Reporting by Jorge Otaola; Writing by Adam Jourdan; Editing by Paul Simao)

No point raising Primark prices if consumers are cash-strapped – AB Foods boss

LONDON (Reuters) – There is little point raising fashion retailer Primark’s low prices when consumers are short of cash, the boss of its owner said on Tuesday, adding that the group could expand its customer base if rivals take an alternative approach.

“With cash starved consumers there’s not much point,” George Weston, CEO of Associated British Foods, told Reuters.

He said if Primark raised prices further it would sell less and undermine its value credentials in the eyes of consumers.

“There’s a chance we’ll come through strongly with increased market share if others take different decisions on price,” he said after AB Foods reported full year results.

Weston said Primark shoppers were generally being cautious on spending and budgeting more.

“People are buying essentials when they need them, not in anticipation of needing them,” he said.

However, he noted that cold weather items, such as hats, scarves and coats, and items to keep people warm in the house, such as snuddies and thermal leggings have been selling “incredibly well, because we think people have been trying not to turn their central heating on.”

Weston also reckons Christmas sales have started earlier.

“People are spreading their Christmas purchases across three or four pay days, rather than relying on cash that they have in hand in December,” he said.

He said Primark stores in the UK were still performing better than stores in continental Europe.”Northern Europe has a well developed habit of saving money when they know there’s a bill to come, so Germany, Netherlands, Austria are all lagging on the sales front … Spain and Italy are better,” he said.

(Reporting by James Davey, Editing by Paul Sandle and Kate Holton)

Exclusive-Arabica coffee heads to ICE warehouses, putting pressure on prices

By Maytaal Angel and Marcelo Teixeira

LONDON/NEW YORK (Reuters) – Large volumes of arabica coffee are about to enter ICE exchange warehouses, traders with knowledge of the matter told Reuters, further weighing on global prices that have already hit one-year lows.

The move to replenish ICE stocks removes one of the market’s last supports and may eventually provide consumers respite from high retail coffee prices which always lag moves on global commodity exchanges.

ICE arabica futures have been under pressure of late on concern that global economic growth is faltering just as top producer Brazil could potentially churn out a record crop.

However, ICE stocks – which have stayed between 1 and 5 million bags for the past two decades – are currently at 23-year lows around 380,000 bags, offsetting some of those concerns and leaving the market prone to volatility.

When stocks are low, traders buying futures contracts can have a greater impact on prices as there may not be sufficient coffee available to meet their demand so those who have sold futures may have to buy back their positions.

ICE exchange data shows that while stocks are critically low, more than 160,000 bags are currently sitting in warehouses waiting to be certified for delivery against futures contracts if they pass quality controls.

Traders say at least another 100,000 bags are on their way.

“If certified stocks start rising significantly there’s nothing bullish left in the market. They would have to rise by more than 200,000 bags though,” said a Europe-based trader at a global trade house.

Certified stocks are a strong driver of ICE coffee prices because, unlike other factors, they are visible to all on a daily basis and many algorithmic funds are pre-programmed to buy when they fall and sell when they rise.

The coffee crop in Brazil, responsible for around 40% of global arabica production, could grow by as much as 10% in 2023 due to favourable weather in recent months, analysts say.

That should push prices for exchange-grade Brazilian coffee, known as ‘semi-washed’, down to levels where it becomes economical to deliver the beans to ICE – a market of last resort at times when there is excess supply.

Traders said physical prices for Brazilian semi-washed coffee dipped in September to levels where exchange deliveries became economical, but the fall was short-lived, hence just 250,000 bags are at or heading to exchange depots to be certified this year.

Next year, those numbers could swell if the favourable weather in Brazil holds up and demand remains depressed due to the economic downturn.

“Demand is very, very quiet. No one wants to buy, roasters are stepping out the market. Whoever (has) coffee wants to get out so the only natural buyer is (exchange participants),” said another Europe-based trader.

(Reporting by Maytaal Angel and Marcelo Teixera; Editing by Emelia Sithole-Matarise)

Cuba cuts plans to export sugar with output expected to stagnate

By Marc Frank

HAVANA (Reuters) – Cuba kicks off the country´s annual sugar harvest this month, but experts and state officials say the crisis-racked Caribbean island will struggle to produce enough of the sweetener even for its own consumption, dashing plans for export.

Cuba’s communist-run government has said it plans to produce 455,000 tonnes of raw sugar this harvest cycle, 14,000 tonnes less than the previous one which hit a hundred-year low and forced the country to scrap plans for $150 million in exports.

Sugar was once the pride of Cuba, critical to its rum production, driving foreign exchange though export sales and providing employment across the island’s vast countryside.

“This is the first plan since the 1959 Revolution that does not include significant exports, though they may export some if the price is right then import later [for local consumption],” said a sugar expert consulted by Reuters, who asked to remain anonymous because he was not authorized to speak with foreign journalists.

The expert said Cuba had worked a similar deal after last year’s disastrous harvest, importing some sugar from Brazil.

Cuba historically consumes between 600,000 to 700,000 tonnes of sugar annually and has a long-standing agreement to export 400,000 tonnes to China, a deal that is now suspended, the expert and another source with access to the industry said.

State-run sugar monopoly AZCUBA has also said that sugar produced this harvest will go mainly to domestic consumption and derivatives such as rum and animal feed.

The loss of that export cash would be yet another shock to Cuba´s ailing economy, already stricken by the coronavirus pandemic and U.S. sanctions.

Just 23 mills of 56 total, hobbled by lack of fuel, supplies, spare parts and staff, will grind sugar cane during this season´s harvest, which typically ends in April.

In 1989, by contrast, Cuba had more than 100 mills and produced 8 million tonnes of raw sugar, most destined for the Soviet Union.

The century-old Uruguay mill in Escambray is among those to be shuttered this year, according to a report in the Sancti Spiritus provincial Communist Party newspaper.

“It was the most shocking decision that the collective and the emblematic factory have experienced in a long time,” the paper reported. “It was as if a relative had died; there was silence, insecurity, tears.”

The mill and surrounding plantations, like much of Cuban agriculture and industry, have seen production and efficiency dramatically decline over the last five years.

(Reporting by Marc Frank; Editing by Kirsten Donovan)

Suedzucker lifts profit forecast as price rises seen trumping higher costs

HAMBURG (Reuters) – Europe’s largest sugar producer Suedzucker on Wednesday raised its full-year profit forecast, as it expects higher sugar prices to compensate for rising energy and raw materials costs.

Suedzucker raised its forecast for group operating profits in its financial year to February 2023 to between 530 million euros and 630 million euros ($524.4 million-$623.3 million) from a previous forecast of 450 million to 550 million euros.

The year before it posted operating profit of 332 million euros.

A spokesperson for Suedzucker, which has a wide range of non-sugar interests ranging from processed foods to biofuels, told Reuters the increase would be driven largely by an improved performance in its sugar sector.

“As we said in our last quarterly report, we are achieving and we expect to be able to achieve higher sugar prices in the second half of our financial year in our main markets,” the spokesperson said.

“This will help compensate for the impact of higher raw materials and energy costs.”

Germany’s sugar industry is among heavy gas users suffering from a plunge in Russian gas exports to Europe, which has sparked a continent-wide energy crisis.

The sugar processing season to refine this year’s beet crop is now underway in Germany and usually ends around early January.

“We have taken steps to ensure energy supplies in our factories this winter,” the spokesperson said. “We are now feeling confident that we will be able to come through this year’s sugar processing season with sufficient energy,”

“But overall, the situation in Europe with energy supplies is still uncertain.”

Sueducker stressed on Wednesday that the impact of the Ukraine war on its markets remain difficult to assess, while risks from the coronavirus pandemic also remain.

($1 = 1.0107 euros)

(Reporting by Michael Hogan; Editing by Jan Harvey)

Exclusive-Argentina set to permit wheat export delays amid drought – sources

By Maximilian Heath

BUENOS AIRES (Reuters) – Argentina’s government is set to announce measures, potentially within days, to allow wheat exporters to delay agreed shipments after a major drought hammered the crop, raising concern about domestic supply.

A source at the country’s CEC grains exporting chamber, which represents companies buying the grain, said measures would be released “in the coming days” to allow firms to reschedule agreed wheat exports without facing the normal 15% fine from authorities.

A government source with direct knowledge of the matter said that measures to permit wheat shipment delays were “probable”. “It’s being studied,” the source said.

The comments are the strongest indication yet that Argentina, one of the world’s top wheat exporters, will seek to delay exports of the grain amid a drought that threatens to cause the worst harvest in nearly a decade.

The CEC source called for quick movement on the plan. “If the government is going to do it, let it do it now, because we have to turn around and talk to customers in Indonesia, Morocco, Algeria, Egypt and tell them that our wheat has burned and renegotiate those contracts,” the person said.

The move could heat up global prices further, after dry weather hit growers in the United States and Russia’s invasion of Ukraine snarled shipments. Russia and Ukraine are both major producers of wheat, used for cereals and bread.

Argentina’s government met with wheat millers and exporters in October to discuss concerns over the drought-hit crop, with pressure from millers rising to keep more supply for the domestic market.

The major Rosario grains exchange has slashed Argentina’s 2022/23 wheat harvest forecast to 13.7 million tonnes, which would be the lowest nationwide in seven years and far below a bumper 23 million tonnes in 2021/22.

GRAPHIC – Argentina wheat

https://graphics.reuters.com/GRAINS-ARGENTINA/WHEAT/akvezdwqmpr/chart.png

The country’s producers have already formally declared overseas sales of 2022/23 wheat of 8.9 million tonnes, official data shows. Argentina’s domestic wheat consumption from the 2021/22 harvest totaled 7.6 million tonnes.

Some 2 million tonnes of wheat were left unsold from 2021/22. There is an existing export cap of 10 million tonnes for the 2022/23 season’s wheat harvest.

Diego Cifarelli, head of Argentina’s milling industry body FAIM, told Reuters the sector was “concerned” about supply and confirmed the talks with the government over potential shipment delays.

He said though that if there were no more wheat losses demand could be met, though the scarcity could push up prices.

(Reporting by Maximilian Heath; Editing by Adam Jourdan and Jan Harvey)

Chocolate maker Barry Callebaut’s counts the cost of factory shutdown

By John Revill

ZURICH (Reuters) -Barry Callebaut reported a drop in full-year operating profit as the world’s biggest chocolate maker counted the cost of the temporary shutdown of its largest factory following a salmonella outbreak.

The Swiss company, which supplies chocolate to food groups such as Unilever for its Magnum ice creams and Nestle, said operating profit fell 2.3% to 553.5 million Swiss francs ($557.6 million), missing analyst forecasts of 586.5 million francs.

The figure was hit by the one-off impact of 76.9 million francs related to the salmonella outbreak at the Wieze factory in Belgium detected in June.

Sales volumes were also affected by the shutdown, with full-year volumes increasing to 2.3 million tonnes. The 5.3% increase represented a slowdown from the 7.9% increase during the first nine months of the year.

Despite the disruption, volume growth was within the range of Barry Callebaut’s mid-term guidance for increases of 5% to 7%. But it missed its goal of raising its operating profit in local currencies at a higher level than volumes, with only a 0.1% increase.

Its shares were up 0.5% on the Swiss exchange.

Chief Executive Peter Boone said the chocolate maker was still on track to achieve its mid-term guidance in its 2022-2023 business year.

“Our Wieze factory runs again at normal capacity, though we will still experience an impact in the first quarter 2022/23 as we are catching up on delayed volume,” he said in a statement.

Barry Callebaut had been due to release its earnings on Wednesday, but published the figures early due to an “unforeseen event”.

During the year it wrestled with higher raw material costs which it managed to pass on to its customers.

Cocoa bean prices had increased by 4.2%, with shortages avoided due to large stocks built up from surpluses in previous years.

Sugar prices increased by 18.7%, due to a lower Brazilian crop, and by 56% in Europe as strong demand met lower production due to reduced farming and dry weather.

($1 = 0.9927 Swiss francs)

(Reporting by John Revill, Editing by Miranda Murray, Michael Shields and David Evans)

Exclusive-Brazil coffee defaults spike for second year in a row

By Maytaal Angel and Marcelo Teixeira

LONDON/NEW YORK (Reuters) – Brazilian coffee farmers are defaulting on contracts for a second straight year, according to traders and lawyers representing the industry, failing to deliver on pre-agreed sales and exposing trade houses to losses.

    The defaults, though less widespread than last year, have scrambled the coffee market, leaving traders reluctant to agree to forward sales for next year’s crop or the one after.

Defaults started to pick up last year after a series of price shocks caused by severe frosts that ruined the harvest.

    This year’s harvest was smaller than expected. Some analysts cut their initial estimates by nearly 4 million bags as trees have taken longer to recover from 2021’s frosts and drought. Coffee prices in August and September traded between $2.17 and $2.21 per pound, over 70% higher than two years ago.

    The surge in prices gave Brazilian farmers an opening to default on contracts so they could sell beans on the spot market, earning a higher price that outweighs any liability for a default.

    Several major exporters such as Sucafina, Olam, Louis Dreyfus and COFCO, as well as co-ops including No. 1 exporter Cooxupe, are legally battling farmers for compensation over contract defaults, according to court documents seen by Reuters.

Sucafina, Olam, Dreyfus and COFCO did not respond to requests for comment. Cooxupe declined to comment.

    “We’ve been told to have less exposure with (Brazilian farmers). It’s going to be one or two years until traders forget” and start buying forward again, said a trader at a large international commodities trading company, asking not to be named.

WIDER IMPACT OF DEFAULTS

    Forward selling by farmers and exporters from top exporter Brazil is an important feature of the market. Advance sales help reduce market fluctuations because they allow farmers to sell throughout the year, not just during harvest.

    Lawyer Cristiano Zauli from Cristiano Zauli Advogados law firm, who assists traders in cases against Brazilian farmers, said he had filed around 50 lawsuits this year against about 100 last year, seeking compensation from coffee producers who have failed to deliver.

    He said he had obtained court orders to seize coffee at farms, similar to last year when harsh frosts damaged around 15% of Brazil’s coffee crop and pushed prices to multi-year highs.

    Traders said this year’s wave of defaults caused the ICE futures price to spike in late September ahead of the front month contract expiry, and could do so again ahead of the December contract expiry on Dec. 19.

    Traders who buy coffee a year or two in advance usually hedge purchases by taking short futures positions. When futures rise, they take a loss on that position, but can offset it with a similar rally in physical coffee prices.

    However, when farmers default, traders do not have the physical coffee to sell to offset the futures market. Instead, traders cover short positions by buying more futures, magnifying wild swings in the market.

That’s what happened in September, when Arabica coffee futures rose from around 2.16 cents per pound to 2.32 cents late in the month, a 7% increase.

    A lawyer working for one of the five largest coffee exporters in Brazil said the defaults concerned less than 10% of Brazil’s total forward contracts. That would still be a significant amount since Brazil produces about 35% of the world’s coffee.

(Reporting by Marcelo Teixeira; Editing by Bernadette Baum)

Barry Callebaut raises the bar in bid to redefine chocolate making

By Maytaal Angel

LONDON (Reuters) – In a move it hopes will redefine the way chocolate is made, Swiss-based Barry Callebaut launched a new bar on Thursday, the fruit of more than 20 years of research into cocoa beans.

The world’s biggest chocolatier said its “second generation” chocolate will use around 50% less sugar than traditional chocolate thanks to a new way of cultivating, fermenting and roasting cocoa beans that reduces their bitter taste.

The product, which will also use about 60-80% more cocoa, is likely to appeal to more health-conscious consumers and get ahead of laws expected to limit sugar consumption in the future, analysts said.

“Anything cutting sugar or using simpler, cleaner, recipes is going to be a positive given consumer and thus corporate demand for those products,” said Kepler Cheuvreux analyst Jon Cox.

The chocolate giant, which supplies the world’s biggest consumer brands including Nestle, said its new chocolate has been tested by independent global research agency MMR in the United States, Britain and China, and found to have high consumer appeal.

“By applying the (new chocolate-making) principle, Barry Callebaut could redefine chocolate completely: ‘putting cocoa first, sugar last’,” the company said in a statement on the product launch.

The innovation could eventually help increase global cocoa consumption and prices should it be widely adopted, while it might leave sugar consumption largely unscathed as sugar cane is increasingly used to make ethanol, industry experts said.

“For cocoa, (it’s) really positive for consumption and therefore the price outlook. However, I think we are talking about years not months,” said a London-based consultant.

World cocoa prices are more than four times that of sugar.

    The new chocolate is more expensive to produce and might be priced slightly higher than regular chocolate, a Barry Callebaut spokesperson said. It could, however, also be sold in smaller bar sizes and is ultimately not aimed at upmarket consumers.

One in four chocolate and cocoa products consumed worldwide are made with Barry Callebaut ingredients and the group processes almost one million tonnes of cocoa a year, about a fifth of the global volume.

Barry Callebaut has since 2017 launched healthier alternatives such as “ruby chocolate”, “wholefruit chocolate” and a cocoa-based drink “Elix”, with varying degrees of success.

    It generally takes between a year or two for a new product to go from launch to supermarket shelves.

“(The) approach by Barry Callebaut fits the way the food market is going,” said Tedd George, commodities expert and founder of Kleos Advisory. “Sugar is definitely the new tobacco. The way chocolate is made will gradually move in this direction as legislation against sugar in food hardens.”

(Reporting by Maytaal Angel; Editing by Matt Scuffham and David Evans)

U.S. mining sanctions take aim at Nicaragua’s Ortega

(Reuters) – U.S. President Joe Biden’s administration ratcheted up economic pressure on Nicaraguan President Daniel Ortega’s government on Monday through a series of steps targeting the country’s mining, gold and other sectors.

Biden signed an executive order that includes the authority to ban U.S. companies from doing business in Nicaragua’s gold industry, while the U.S. Treasury Department imposed sanctions on Nicaragua’s mining authority, along with another top government official, the department said in a statement.

The order’s expanded sanctions powers could also be used to block new U.S. investment in certain other sectors in Nicaragua, the importation of certain Nicaraguan products or the exportation of certain items to Nicaragua, it added.

Gold was Nicaragua’s main export last year, with total shipments abroad of the precious metal amounting to $867.6 million, and 79% of that going to the United States, according to central bank data.

“The Ortega-Murillo regime’s continued attacks on democratic actors and members of civil society and unjust detention of political prisoners demonstrate that the regime feels it is not bound by the rule of law,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said. He said the U.S. actions aimed to deny them “the resources they need to continue to undermine democratic institutions in Nicaragua.”

Nicaragua’s economy grew 10.3% in 2021, according to data from the World Bank, underpinned by a surge in remittances from the United States, as well as gold and coffee exports, but a sharp slowdown is expected this year.

The two sanctions announced on Monday target Nicaragua’s General Directorate of Mines, a unit of the Nicaraguan Ministry of Energy and Mines that manages most mining operations in the country, and Reinaldo Gregorio Lenin Cerna Juarez, a close Ortega confidante, Treasury said.

Under the move, any property they have in the United States would be frozen and any U.S. persons are prohibited from doing business with them. (This story has been corrected to change the target of sanctions to Nicaragua’s mining authority instead of the head of Nicaragua’s mining authority in paragraph 2)

(Reporting by Tyler Clifford and Susan Heavey; Editing by Doina Chiacu, David Gregorio and Marguerita Choy)

Cotton exporter Benin developing home-grown textile industry

By Pulcherie Adjoha

GLO-DJIGBE, Benin (Reuters) – On a large factory floor in southwestern Benin, dozens of young people cut, stitch and assemble cotton shirts – part of a major push by the West African country to develop its textile sector.

Benin has in the last few years become Africa’s leading cotton producer, with annual production of 728,000 tonnes in 2020/21, according to government figures. It exports almost all of that raw, with the majority going to Bangladesh.

Now, an initiative is under way to create jobs and revenue by processing the cotton locally, with the goal of exporting apparel to consumer markets in Europe, Asia, Africa and the United States.

“We have decided that in this country, we are no longer going to sell this cotton raw. We are going to transform this cotton, in particular by installing integrated textile factories,” said Letondji Beheton, managing director of the Glo-Djigbe Industrial Zone (GDIZ), about 45 km from Cotonou.

GDIZ started two years ago as the result of a partnership between the government and Arise Integrated Industrial Platforms (Arise IIP), a pan-African venture partly owned by the Africa Finance Corporation.

More than $1 billion has been invested in the zone so far, which will include textile factories as well as cashew processing units, pharmaceutical processing units, and more, said Beheton. Only a quarter of it has been developed so far.

Although the systems are not yet in place to get cotton from field to factory, GDIZ has started training about 1,000 garment workers using imported materials for now.

“When the Glo-Djigbe factory starts its activities, I am sure that we will earn more,” said 46-year-old cotton farmer Leonard Madjaedou, who has benefited from government support to boost his yields.

In 13 months, the industrial zone aims to employ 15,000 people in three textile factories that will have a processing capacity of about 40,000 tonnes of cotton fibre, Beheton said.

Eventually, he envisages a multi-billion dollar industry that could process the majority of Benin’s cotton.

Cotton is grown in several West African countries including Mali, Togo, Burkina Faso and Ivory Coast, but most is exported raw with little industrial processing across the region.

(Editing by Alison Williams)

Global coffee market favoring higher quality, not higher volumes

By Marcelo Teixeira

NEW YORK (Reuters) – The global coffee market is going through a transformation trend that will involve higher quality and pricier coffees, but not higher overall traded volumes, as people increasingly use single doses and cut out old-style, large dripping jars.

The COVID-19 pandemic boosted that movement, according to an industry expert, as people were cut out of office coffee and started to explore new processes and qualities.

“There is no way back,” said Henrique Dias Cambraia, a coffee producer, processor and the president of Brazil’s Specialty Coffee Association (BSCA).

“Coffee drinkers increased their knowledge, acquired equipment – they are willing to spend more on higher quality,” said Cambraia in an interview, adding that the market has experienced the growth of single-dose offerings with Keurig dominating in the United States and Nestle’s Nespresso leading in Europe.

“This trend will probably limit volumes, because those processes use less coffee, but it will boost pricier specialty coffee sales,” he added.

The U.S. National Coffee Association said in its latest data trends report at the end of September that 54% of Americans had at least one specialty coffee serving in the prior week.

Cambraia said the trend is stronger in richer countries, but that it is also happening in emerging economies where there has been improvement in incomes.

Farmers are aware of the change, he said, and are adapting to produce better coffees.

Brazil, for example, the world’s largest producer and exporter, which in the past was mostly a supplier of commodity coffee, is currently shipping several types of high quality products.

Cambraia estimates around 20%-25% of Brazil’s arabica coffee is currently qualified as specialty. He expects that to increase as newer-generation farmers acquire knowledge of post-harvest processes to increase quality, such as fermentation, and apply that to family farms.

(Reporting by Marcelo Teixeira; Editing by Josie Kao)

Russian weekly consumer prices rise marginally as central bank rate decision nears

MOSCOW (Reuters) -Weekly consumer prices in Russia rose marginally for the fourth week running, data published on Wednesday showed, adding weight to analysts’ expectations that the Bank of Russia may decide to end its rate-cutting cycle next week.

The central bank cut its key rate six times this year after an emergency hike to 20% in February as Russia sending tens of thousands of troops into Ukraine, causing inflation to spike. Last month the bank cut rates to 7.5%.

Russia’s consumer price index rose 0.02% in the week to Oct. 17, the Rosstat federal statistics service said. Prior to the current four-week sequence, the last time weekly prices rose was in May.

A separate set of Rosstat data published on Wednesday showed the producer price index, a measure of how much suppliers charge clients, staying at 3.8% on annual terms in September, the same reading as in August.

In other data, the economy ministry said annual consumer inflation slowed to 13.10% as of Oct. 17, down from 13.36% a week earlier.

Falling living standards have weighed on consumer demand, hitting retail sales and leading to an extended period of deflation over the summer. President Vladimir Putin’s military mobilisation drive now threatens to undermine productivity, demand and economic recovery, analysts have said.

But Evgeny Suvorov, economist at CentroCredit Bank, said mobilisation appeared to be having a disinflationary impact on prices for most goods, as people have reduced spending.

“Some went to the front, some left, some are hiding,” Suvorov wrote on his MMI Telegram channel. “If a strengthening of the disinflationary trend becomes evident over the next couple of weeks, then the central bank could again go for a rate cut on Oct. 28.”

In a report on Wednesday, the central bank said the current lending dynamics and budget parameters for 2022-23 would accelerate growth of the money supply, suggesting that inflationary pressure in the economy would increase in the coming quarters.

High inflation has for years been a top concern for Russian households as it dents their spending power and eats into living standards. Poverty rates are relatively high in Russia and surveys show more than half of all households have no savings.

Since the start of the year, consumer prices have risen 10.55%, Rosstat said. At the same point in 2021, year-to-date inflation was running at 6.49%.

(Reporting by Alexander Marrow and Darya Korsunskaya; Editing by Jon Boyle)

Russia says grain deal extension ‘directly depends’ on easing restrictions on its exports

(Reuters) – Russia on Monday told a top United Nations representative that the extension of a landmark Black Sea grain deal was dependent on the West easing Russia’s own agricultural and fertiliser exports, the defence ministry said in a statement.

In a meeting in Moscow, Russia’s deputy defence minister Alexander Fomin told U.N. Under-Secretary-General Martin Griffiths that extending the deal, which unlocked Ukrainian agricultural exports from its southern ports, “directly depends on ensuring full implementation of all previously reached agreements.”

Russia says the impact of Western sanctions on logistics, payments, shipping and insurance prevents it from exporting fertilisers and chemicals like ammonia and that easing those restrictions was a key part of the deal, brokered in July by Turkey and the United Nations.

(Reporting by Reuters)