Sao Paulo, Nov 3 - Banks in Brazil have all but turned off the tap on short-term loans for producers and exporters of coffee, which could slow the pace of shipments as firms' cash flow diminishes, exporters said on Monday.
Exporters in the world's largest coffee producer finance the purchase of millions of dollars of coffee with special loans issued by private banks to exporters who can show firm contracts for future sales. The loans are often repaid several months later, when the buyer abroad has settled up.
But coffee exporters say the usual interest rate of 4 or 5 percent has roughly trebled -- and that is for those able to find a bank willing to lend at all. The increase is enough to wipe out profit from some transactions, they said.
"This is the biggest problem we are facing right now. There are almost 170 or so exporters all fighting for the money available," said Washington Rodrigues, chief executive at Ipanema Coffees, a major Brazilian producer and exporter.
"This could affect coffee more than the other agricultural commodities. From now until the next crop, you have to put money in and the tree gives you nothing," he said, adding farmers mostly needed cash for inputs and to pay farm laborers.
Brazil is now finishing harvesting a crop estimated at 45-50 million 60-kg bags or more. Next year's harvest will be smaller because the crop's output rises then falls from one year to the next.
RUNNING ON EMPTY
Exporters need to stump up the cash for the thousands of bags of coffee stacked up on farms or upcountry warehouses, tying up their money for weeks until the buyer has paid.
"Exporters have a working stock, so probably the guys with cash just keep on going and the guys without first need to (sell and receive payment for) some stocks so they can keep on buying," said a buyer at one exporter asking not to be named.
Some firms were likely to run out of cash, he said, unless borrowing conditions eased soon.
"Depending on how bad it gets, that could leave only a few to buy and that would be bad for the local market because prices would go down," said the buyer.
Several exporters said they had enough money to continue purchases for the time being and were confident banks would ease lending soon.
"It is hard to believe that it could stay like this for five or six months," said Ipanema's Rodrigues. "In weeks, the money will appear again from the government. Emerging countries need credit to export and there is none available right now."
In a bid to force banks to lend more and grease the wheels of trade, the central bank said last week 70 percent of lenders' term deposit requirements had to be lodged with it without interest -- raising the appeal of commercial lending.
Rodrigues said he was seeking to cut or postpone expenditure at Ipanema's plantation -- one of the world's largest and located in Minas Gerais, the state which alone turns out about half of Brazil's coffee.
"Any money we are borrowing at this rate will hit our profit so we have to avoid taking this money," he said.
Brazil's currency, the real, has lost almost 30 percent of its value since Aug. 1 making coffee cheaper for exporters who work in dollars -- and cushioning the local market from a coinciding tumble in the commodity's price.
But the real's volatility in the last couple of weeks, which has seen it often lose or gain several percent in a day, has also made buyers reluctant to rush to the farm gates to buy beans as they wait for the most profitable moment.
"Everything has stopped in terms of trade with the dollar moving and people not knowing what to do," said Paulo Favaro, a coffee broker in Varghinha.