Exchange Shuts Louis Dreyfus Coffee Trading Warehouses

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 [e-mail]

(END) Dow Jones Newswires

November 22, 2018 05:37 ET (10:37 GMT)

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