Brazil has enough coffee to meet global demand

RIO DE JANEIRO, BRAZIL – “This is not a time of high stocks, but they are sufficient to meet local and international industry,” CECAFÉ’s Nicolas Rueda said in an interview. After an abundant 2020-21 crop, “it was possible to accumulate considerable stock.”

His comments allow for a better insight into a market where there is a shortage of transparent and updated data on how much Arabica coffee Brazilian producers stockpile, the Starbucks chain’s favorite.

Stocks monitored by ICE Futures in the U.S. are at their lowest in 22 years.

Concerns over the condition of the Brazilian crop after two years of weather issues and the supply chain crisis caused by the pandemic have pushed Arabica futures contracts in New York to their highest level in a decade.

As with several commodities, the rise in coffee prices contributes to the increase in the cost of living worldwide.

An important indicator of the balance between supply and demand, stocks monitored by ICE total approximately 1 million 60-kilo bags, while the U.S. Department of Agriculture estimates global stocks at 30 million bags.

The latest data on Brazilian stocks from the National Supply Company (CONAB) dates back to March 2020, with a projection of 13 million bags in storage. Much has happened since then and the amount of coffee stored today in Brazilian warehouses is a mystery.

However, Rueda believes that the main problem is not the supply to meet demand, but the outflow of the product. In addition to a shortage of containers that hindered Brazil’s coffee exports last year, land transportation also poses difficulties in major destinations such as the U.S., where truckers are scarce.

“The whole logistical process is out of balance and it will take some time to recover,” Rueda said, who is also the South and North America director for Volcafe, one of the world’s largest trading companies.

Brazil exported 2.8 million bags of Arabica coffee in January, 10% less than the previous year. The downward trend in volumes should persist in the coming months, according to HedgePoint Global Markets.

There was an improvement in shipping bottlenecks in January, with more ships available, but containers are still lacking, according to Rueda.

As a result, exporters are shipping coffee in sacks, called “big bags,” stacked in the holds of ships, as they did in the past, before the container logistics era.

In 2021, five such shipments departed from Brazilian ports, and Rueda believes this also occurred last month.

“This shipping modality is here to stay,” he added.

Two successive bad harvests in Brazil should keep the country’s stocks near their lowest level in decades, according to data from the U.S. Department of Agriculture.

This situation leaves little room for further problems in Brazilian crops. Any frost could aggravate the limited supply situation.

The outlook for Arabica coffee production has improved since late last year, with rainfall helping coffee trees to recover, Rueda said.

Recent rains should benefit the 2023-24 season, but also favor the current crop by mitigating the impact of recent droughts and frosts during bean formation.

In addition, Robusta coffee producers should harvest a record volume from March or April, months before the Arabica harvest.

“That will help calm the market hunger,” Rueda said.