The largest global coffee producer has long been able to supply large volumes at affordable prices to markets, as mechanized harvesting and cheaper processing methods keep their production costs below those of their rivals.
As coffee production grows, Brazil also increases the production of higher quality arabica, and now, for the first time, it is sending its surplus beans to New York futures markets in significant volumes.
Data show that the amount of Brazilian coffee in ICE warehouses and available for delivery under future commodity contracts soared to 88,294 bags, compared to 650 bags on September 3, helping to move total stocks from the 20-year lows recorded recently, when reached 1.1 million bags.
The move poses a threat to rivals, especially in Central and South America, as it could put further pressure on the Arabica coffee benchmark at ICE, which touched lows of almost 14 years in 2019 and remains below the production costs of several small coffee growers.
Futures at ICE tend to fall when the volume of stocks that reference them grows, although only the possibility of futures traders receiving coffee from Brazil - less sought after than Central American beans - can also bring them down.
And the flow of Brazilian coffee so far is probably just the tip of the iceberg.
Operators expect up to 400,000 bags to be delivered in the coming months, the first major arrival since ICE changed its rules in 2013 to allow Brazil's "semi-washed" premium coffee to be delivered against Arabica futures " high quality.
In the coming years, an even greater volume may be delivered.
Washed coffee, which involves extracting the fruit with water before drying the beans, has a higher production cost and demands higher prices.
Brazil mainly produces "natural", of inferior quality, in which the cherries are dried before extraction, but a higher quality crop this year allowed an increase in the production of "semi-washed" grains, in a process with fewer stages than that of fully washed coffee, but that still results in good quality.
"If current market conditions emerge again, Brazil's 'semis' will be delivered again," said Vivek Verma, CEO of Olam Coffee, part of Olam, one of the largest agricultural commodity traders in the world.
"Some washers would have to abandon coffee entirely, which would be a tragedy," he added.
Honduras remains the main source of ICE's coffee stocks, with 856,425 bags. But that total has almost halved compared to last year, when it reached 1.52 million bags.
"The low prices we had on coffee meant that producers (outside Brazil) no longer wanted to harvest their coffee, they did not bother to harvest it, so we were unable to replenish certified stocks," said an operator at an international commodities trading company. .
Operators believe that Brazil produced 6 million to 10 million bags of semi-washed coffee this year, almost double the amount it usually produces.
This increase in production resulted in the drop in prices of Brazil's "semis" in physical markets, which made the delivery of grains to the stock market an attractive option.
This may not be the case every year, but many believe that a long-term change is underway.
"Brazil's 'semis' are potentially the future, they can become the dominant force in this market," added the trader.
A second operator said that "it would be a great game changer. People can invest more in the washing capacity of Brazil and other origins of arabica would become a niche, premium, gourmet product ... it will take about three years for that to happen."
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