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Supply Chain

Global Coffee Supply Deficit Seen Up On Lower Brazil Output: Report

The global coffee market is expected to experience a larger deficit in the 2021/22 season than initially projected, as output in main supplier Brazil is seen smaller due to below-average rains, according to a new report.

Dutch bank Rabobank, which has a strong footprint in the agricultural sector, said it now projects a global balance supply deficit of 2.6 million 60-kg bags in 2021/22 compared with 1.1 million bags seen in December.

"We trim our 2021/22 production number by just over 2 million bags - 1.2 million bags of this drop comes from a downward adjustment in Brazil," the bank said in the report produced by analysts Carlos Mera and James Watson.

Rabobank now expects the new Brazilian crop at 56.2 million bags versus 57.4 million bags seen in December.

Outlook

The bank also reduced the expected crop out of Colombia, a producer of fine mild arabicas, by 300,000 bags to 14.1 million bags.

The deficit is not larger because the bank reduced its view for total demand by half a million bags.

'Net imports in non-producing countries continued to come in weak in Q4 2020,' the bank said, citing a 1.9% drop in what it calls 'coffee disappearance' in Europe plus UK and a 9.5% drop in Japan.

Also, there is a large carryover volume from the previous season as the surplus in 2020/21 is seen at 10.5 million bags.

Coffee Prices

Rabobank thinks arabica coffee prices should not stay above $1.30 per pound (in the second contract in the New York futures chain), but said that 'factors like speculation, shipping costs, and increased demand for inventories could cause that scenario.'

Coffee prices jumped 4.5% on Monday (22 February), hitting the highest level since December.

News by Reuters edited by Checkout. Click subscribe to sign up for the Checkout print edition.

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