Exchange Shuts Louis Dreyfus Coffee Trading Warehouses
November 22 2018 - 05:52AM
Dow Jones News
By David Hodari
Trouble is brewing for Louis Dreyfus's coffee trading operations
after Intercontinental Exchange Inc. suspended three company-owned
storage facilities from a list of approved warehousekeepers.
ICE Futures Europe notified its members last Friday that it
banned 4Stox NV, a Louis Dreyfus-owned depot in Antwerp, Belgium,
from exchange warehousing activities. 4Stox facilities contained
robusta coffee and cocoa traded as part of the exchange's
London-listed futures contracts.
In early October, ICE suspended 4Stox Barcelona, as well as
Louis Dreyfus-owned warehouse Molenbergnatie Espana from activities
"until further notice."
Closely held Louis Dreyfus, along with Archer Daniels Midland,
Bunge, and Cargill, comprises the "ABCD" companies that dominate
global agricultural trading.
Louis Dreyfus Company said the Antwerp suspension is related to
a continuing review at its warehousing subsidiary called Ilomar.
The suspensions came "following a dialogue with ICE EU initiated by
LDC on specific concerns relating to the grading and
warehousekeeping procedures at Ilomar's Barcelona warehouses," the
company said in a statement.
"We do not believe that they are related," the company added,
referring to the concerns in Antwerp and Barcelona.
A Louis Dreyfus spokeswoman declined to elaborate on the precise
nature of concerns. An ICE spokeswoman declined to comment beyond
its suspension order, which didn't provide further details.
The Robusta coffee in question, as opposed to its more expensive
Arabica counterpart, is easier to grow and tends to be used more by
instant coffee makers than by baristas.
The moves haven't appeared to affect prices of the popular
commodity, according to several traders. But the regulatory
crackdown has focused attention on one of the most prominent names
in the coffee trade and commodities in general.
The amount of coffee held in the warehouses is relatively
modest. 4Stox NV, Antwerp is owned by Ilomar Holding NV, a
subsidiary Louis Dreyfus acquired in February 2014. The 4Stox's
warehouses held 32 lots, or 320 metric tons, of low-grade robusta
coffee. At current prices that coffee is worth more than
$500,000.
The Louis Dreyfus warehouses suspended in Spain may have held as
much as 1,180 metric tons of coffee, or just under $2 million.
By contrast, the port of Antwerp held the largest coffee
inventories in Europe, with 346,648 metric tons -- more than $567
million -- of beans held in warehouses, according to European
Coffee Federation's monthly market report for September.
Louis Dreyfus-owned Ilomar manages warehouses in Antwerp through
its 4Stox and Molenbergnatie subsidiaries. While Molenbergnatie's
Barcelona operations were suspended, its Belgian warehouses haven't
been affected by any suspensions.
The storied commodity trading house has been through a
tumultuous few years, with a clash between its founding family and
its chairman, Margarita Louis-Dreyfus. Most members of the family
have since exited the business. In September, former-chief strategy
officer Ian McIntosh became Louis Dreyfus's fifth chief executive
since 2011.
Agricultural commodities traders have suffered in recent years
as prices of sugar, coffee, and grains have fallen steadily.
Robusta coffee futures have slumped 28% since their five-year peak
hit early last year on plentiful supply.
Write to David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
November 22, 2018 05:37 ET (10:37 GMT)
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