Brazil ditches standard jute coffee bags, leading move toward bulk

Wondwossen's Note:  In 2011, there was a failed attempt in Ethiopia to ship all coffees in bulk. Click here  to read exactly what happened back then.  

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Reese Ewing

Reuters

December 20, 2015

SANTOS, BRAZIL – The humble jute bag, long the distinctive packing for Brazil's coffee exports, is rapidly being edged out as traders and cooperatives face rising wage bills and borrowing costs, weak global prices and a deepening economic crisis at home.

By introducing massive plastic sacks to replace the 60-kg (132-lb) jute bags that have dominated coffee shipments for more than two centuries, firms are saving millions of dollars a year, in a move so successful it is expected to reshape the global industry.

Until a few years ago, the world's biggest coffee producer dispatched nearly all its exports in jute bags. Next year will see Brazil export more than half its green coffee in 1-tonne polypropylene 'super sacks' or 21.6-tonne polyethylene liners.

Dinamo, the largest coffee warehouse at the port of Santos, said super sacks accounted for 30 percent of its exports in 2015 and are growing by 5 percent a year. Brazil's biggest coffee cooperative Cooxupe has nearly eliminated jute.

"It's the future," said trader Mauricio Di Cunto at exporter Comexim, which ships half its coffee in bulk. "It lets us be more aggressive in offering discounts without the cost of jute."

The 60-kg jute bag has been a standard unit of measurement for coffee trading since Brazil started commercial production of the bean in the 18th century. The grains and sugar sectors long ago moved to bulk, but coffee has been a laggard.

National data on exports in super sacks is not yet available but exporters association Cecafe is due to start monitoring their use from January.

The growth in bulk handling reflects a plunge in manual laborers lifting coffee bags. Higher wages and stricter regulations, which expose industry to worker-injury lawsuits, are hastening the decline.

The calculation is compelling: one worker with a forklift can fill a container with super sacks in 25 minutes, while 9 men need nearly an hour with jute. Loading a liner is even faster as beans are dumped in loose.

It costs 22 to 40 centavos every time a worker hoists a 60-kg bag to fill a container or weigh it. Brazil produces 50-60 million bags of coffee a year.

On the cobble-stoned streets of Santos, a port that rose to fame with Brazil's coffee boom, a small team of lifters gathered recently in the morning light at the entrance of the Dinamo warehouse, one of two that still handles coffee at the port.

"We used to have 59 lifters on a shift, now we have nine," union leader and former lifter Carlos Roberto Lima reflected.

The move to bulk treatment of coffee is taking place as global raw materials prices fall with slower demand growth in emerging markets like China. The price of coffee, which is Brazil's sixth most valuable commodity export, has fallen by more than 60 percent from highs in 2011 to $1.17/lb.

SILVER LINERS

International Coffee Organization Executive Director Roberio Oliveira said the move to bulk is helping Brazil adapt to just-in-time logistics to manage stocks better as prices decline.

"This is still mostly a Brazilian development," Oliveira said, adding that he expects other exporters to follow.

Big roasters like Starbucks Corp, Folgers and Maxwell House were the first to receive lined containers almost a decade ago.

Since then, liners, which Cecafe has monitored since 2007, have grown to account for half of Brazil's green coffee exports, said the association's technical director Eduardo Heron Santos.

A lined 20-foot container holds 21.6 tonnes of coffee, while one with jute holds only 19.3 tonnes, said Alex Jairo Pinto, director at Dinamo. A container holds 20 tonnes in super sacks.

Whether jute or bulk, the cost of shipping the container is the same, he said. "That's one reason 60 percent of the coffee we ship is in liner and 30 percent in super sacks," said Pinto.

Cooxupe, which moves a tenth of Brazil's crop, was one of the first to shift to bulk bags a few years ago, president of the co-op, Carlos Paulino da Costa said.

"We have almost eliminated the jute bag," he said, adding it saves the co-op 18 million reais ($4.7 million) a year.

Jute costs 4 reais ($1) a bag, plus a real to sew it up for reuse. The one-tonne super sack at 50-to-150 reais costs almost the same, equalizing for weights, but lasts twice as long.

HARD HABITS

Savings are still imperceptible for consumers as much of what constitutes retail prices comes after beans leave traders' hands, as costs for roasting, marketing and preparation. But they will get a better product, as plastic protects coffee better from the elements than jute.

"The bulk bags help preserve coffee's favor," said Daniel Wolthers at trader Wolthers & Associates in Santos. "You won't get the taste of the jute."

Super sacks, however, will not topple the 60-kg bag any time soon as the basic measurement for coffee, just as the bushel remains relevant as a measure, even though grains are traded in bulk.

And the specialty coffee business, which reaps premiums for socially and environmentally differentiated beans, will be slow to shed its aesthetic attachment to jute, said Felipe Gurdian, green coffee buyer for Montreal-based Cooperative Coffees.

Earthy-colored jute bags, with their coarse grain and pastel-shaded stamps of origin, convey a sense of a traditional product that comes from the land.

"There's still reluctance to adopt bigger bags for a nuanced product like specialty coffees," Gurdian said.

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(Editing by Daniel Flynn and Frances Kerry)