Some coffee firms are told they have to wait to January to get their order of NYSE Liffe certified coffee because coffee warehouses in Antwerp where some two-thirds of world’s supply are located are controlling deliveries and creating artificial bottlenecks.
“You shouldn’t have a situation whereby you’ve got physical premiums at significant levels and when people go to take up exchange stocks they discover they can’t access the product in a timely manner. The warehouses are preventing cash convergence as people are unable to use the exchange as a supplier of last resort as all commodity futures contracts should be,” says James Hearn, joint head of agriculture at broker Marex Spectron in London.
Metals warehouses are doing a similar thing by limiting the amount of metal they let out which jacks-up the price and produces profits which they pocket while end users complain.
“Many are turning to the spot market and effectively paying again for coffee they had already purchased on the exchange but cannot access,” explains Reuters.
“Conflicts in financial markets are one of the key issues being looked at by regulators. The warehouse keepers have a major conflict as their interests can be at odds with the interests of their customers; their customers may want coffee swiftly, whilst the warehouse is incentivized to hold onto coffee for as long as possible,” Marex’s Hearn said.
Just like in the metals market, regulators just keep looking at the issue.
Full story here.