By Marcelo Teixeira
(Reuters) – The mid-sized coffee merchant Central do Cafe in Brazil’s Minas Gerais state suspended operations temporarily starting this week, seeking to renegotiate its debts, according to a note shared by farmers on Thursday and local media.
The shortage in global coffee supplies had sent prices soaring to record highs. Some merchants and commodities traders have felt the strain. They are exposed if farmers are unable to deliver contracted volumes, and they also have financial exposure to rising prices in coffee futures.
Brazilian coffee traders Atlantica and Cafebras won a grace period in courts late last year to renegotiate debts with clients after the firms said they were impacted by defaults from farmers.
Central do Cafe is based in Muzambinho, in the South Minas Gerais region, where most of the coffee farms are located in the state. It buys coffee from local producers and sells it to roasters or exporters. Minas Gerais is the top coffee producing state in Brazil, the world’s top coffee supplier.
A notice from the company to its clients shared by a farmer with Reuters said the firm would be closed for an undetermined period while it evaluates its financial situation.
“We will soon call employees and business partners for meetings,” Central do Cafe said in the notice, adding that the pause on its operations was necessary while it tries to renegotiate some of its debts.
A local newspaper in the town also published the statement from the company. Reuters was unable to contact the company in Brazil.
Arabica coffee futures in New York, a global benchmark, rose 70% last year and are up 37% so far this year due to limited supplies in the market.
(Reporting by Marcelo Teixeira; Editing by Simon Webb and Sandra Maler)
