SUPPLY AND DEMAND QUARTERLY REPORT MAY 2014

Transcription

1 COFFEE MAY

2 MAY Brazil: I. PRODUCTION The spread of opinions on the size of the / Brazil crop, never mind the / one, is still startlingly wide. Only the full flow of the arabica harvest will bring solid information on yield from cherry to exportable green bean. This yield typically lies within a rather narrow range, but recent weather will have pushed the average yield outside this norm. The / crop has many hurdles to pass before it is harvested. After our April crop survey, we revised down our / arabica crop estimate by % due to heat and dryness. We raised our conillon estimate by %. This leaves our crop estimate at., of which. are arabica and 7. are robusta. Although the market is trading the uncertainty over future Brazil crops, let s not forget any surprises that could come from the finalized statistics. Shipments have been ramping up markedly, showing the good size of the last Brazil crop, and aggressive producer selling since the beginning of pushing internal diffs to attractive levels. Exporters have been able to book good volumes with roasters in recent weeks. April exports hit 3, the highest April exports ever from Brazil. Total exports could hit 3, the second highest export total ever. Diffs in the last quarter were generally soft across all qualities due to good producer selling amid higher outright prices. The trend now is towards an increasing premium for higher qualities as we move into the new season. Vietnam: We completed our first survey of the / Vietnamese crop, and the results are suggesting that it will be marginally smaller than the current crop, so no surprises. Exports in the current season are accelerating as expected. Oct-April shipments (including soluble) are down only % on the same period last year. However the high shipment rate so far through May leads us to forecast that exports from Oct-May will in fact be % up on last year. 3 3 Vietnam Coffee Exports forecast Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Stocks held in HCM city are at the highest level ever, reflecting the largest ever crop. As of today, around % of the crop is still with the farmers. Vietnamese FOB differentials weakened rapidly to a good discount to the Liffe market in the last quarter. Exchange-certified coffees are finally building again. Indonesia: The world s third-biggest coffee producer is harvesting a robusta main crop that is expected to be % down on last year. The likely-approaching El Niño will make for a dry harvest and good quality. If the weather phenomenon strengthens, the consequent lasting lack of rain could have a negative impact on the crop, as a strong El Niño has constrained Indonesian crops in the past. Although the reliable statistics are slow to come through, it looks like Indonesia has shipped a similar volume of green coffee in the first half of the season to that of the previous season, but the rate of export slowed down in the second half. Companies in Indonesia have been rapidly expanding soluble manufacturing capacity. Soluble exports in particular to the Philippines are becoming a greater part of the Indonesia picture

3 MAY Colombia: The strong main crop lifted official production figures from Colombia to. in the period from Oct- March, compared to. the previous season. Last year s mitaca was very strong, with official production figures at.3. So far, this year s mitaca is not flowing as strongly and replacement differential levels have not yet eased up. Strong for Colombian coffee is present from all directions. Like other many other emerging market currencies, including the Brazil Real and the Indonesian Rupiah, the Colombian Peso has recently strengthened after a weak start to the year. The latest agri-strikes are now over, and national elections are due the th May. Peru: Peruvian coffee export statistics have traditionally been the most tangled to unknot in Latin America. This season, green coffee export stats for the April-March crop year were published by various sources. The most reliable sources (customs and the exporters chamber) published the same figure of. mio kg bags. This is a very similar volume to what we believe was exported in, despite the crop being substantially larger according to our field studies. Some coffee may have been unofficially transported over the border. Continued fieldwork in the centre of the country is indicating a much lower crop in /, similar to our findings in the newer coffee areas in the North. II. COFFEE DEMAND European coffee disappearance continues to hover unchanged around European Union coffee disappearance... Volcafe coffee estimates 3 Sep Sep Sep Sep Sep Sep Sep Sep We use this disappearance indicator to forecast unchanged overall coffee in Europe. In stark comparison, US and Canada coffee disappearance continues to rise, up.% in the twelve months until March. We forecast in North America to rise by.% this coffee year, a rate which may be on the conservative side. 7 USA & Canada coffee disappearance Volcafe coffee estimates. Sep Sep Sep Sep Sep Sep Sep Sep Both Europe and the US are mature, high-income markets. The last time that arabica retail prices rose, in mid, consumers shifted to robusta-heavy products. Total coffee was unchanged from trend. At that time, robusta prices did not shoot up; there were huge volumes of extra robusta availability to accommodate the massive shift in. In the newer consuming markets of Asia, incomes are lower, and so coffee price is a larger part of expenditure. The new Asian consumers are generally robusta consumers. If both arabica and robusta prices were now to climb higher together, these Asian markets would be the first to see total coffee fall. The new coffee consumer in South East Asia is likely to be much more price-sensitive than the traditional coffee consumer in Europe or North America. However, if both arabica prices and robusta prices were to skyrocket together, these traditional European and American markets would also not be entirely immune. We could well see a reaction to price if there is no cheaper coffee to fall back on i.e. consumers actually drinking less coffee. We have not seen this since the 99s. However, this all depends on the fate of the Brazil crops, with / being the more important one.

4 III. BALANCES AND STOCKS After years of surplus, the / season will see the largest deficit in more than a decade /3 3/ 3 / - / Total Coffee Balance 7 /7-7/ /9-7 9/ / /3 3/ / / /7 7/ /9 9/ / / 3 99/ / / /3 3/ / / /7 7/ /9 9/ / / weeks of MAY - Most of the / deficit is in Brazil arabica; this is not an unusually sized shortfall. The problem is that / is likely to be a deficit too. - - /3-9 3/ 3 / Brazil arabica / /7 7/ /9-9/ / / After recent stock-build, the mild arabica market is in a small deficit. - - Mild arabica -3 / Smaller Vietnamese and Indonesian crops in /, plus continued growth, causes a global robusta deficit too. - - /3 3/ / - / Robusta /7 7/ /9 - Global end-season coffee stocks will be the highest in a decade by the summer. Next season s deficit will put a dent in them, but key is / / / / /3 3/ / / /7 9/ 7/ / /9 9/ Global Coffee Carryover Stocks / robusta stock arabica stock Coffee has risen so fast that by the end of /, global total coffee stock/ ratios (green line) will already be at historical lows. / Global Coffee Carryover Stock/Demand Ratios arabica robusta total /

5 MAY IV. TABLES PRODUCTION BY COUNTRY PRODUCTION BY TYPE mio kg bags / mio kg bags / Brazil Arabica Vietnam Brazil Colombia Colombia Indonesia Ethiopia India Peru Peru Honduras..7.. Honduras..7.. Mexico Ethiopia Guatemala Mexico India.9... Guatemala Others Uganda Côte d Ivoire Robusta Costa Rica Vietnam El Salvador.3... Brazil Nicaragua.... Indonesia.... China.... India Tanzania...9. Uganda....9 Others Others TOTAL TOTAL CONSUMPTION BY REGION CONSUMPTION BY TYPE mio kg bags / mio kg bags / growth % % 3% % EU Total Robusta By Importers Other Europe By Brazil internal Market By Other Coffee Producers USA & Canada growth -% -% % % Asia Brazil Arabica By Importers Africa By Brazil internal Market Latin America growth % % % % Non-Brazil Arabica By Importers Incremental Volume By Coffee Producers growth 3% 3% % % TOTAL...7. TOTAL...7. BALANCE BY TYPE STOCK CHANGE THROUGH SEASON mio kg bags / -yr mio kg bags / Robusta Balance Robusta Stock Change Production in consumer port Consumption in origin location Brazil Arabica Balance Brazil Arabica Stock Change Production in consumer port Consumption in origin location Non-Brazil Arabica Balance Non-Brazil Arabica Stock Change Production in consumer port Consumption in origin location Total Arabica Balance Total Arabica Stock Change Production in consumer port Consumption in origin location TOTAL Total

6 MAY IV. PRICES NEW YORK ARABICA AND LONDON ROBUSTA: SPOT MONTH CONTINUATION NEW YORK C ARABICA - LONDON LIFFE ROBUSTA: ARBITRAGE ST MONTH - ST MONTH BRAZIL BM&F ARABICA NEW YORK C ARABICA: ARBITRAGE ST MONTH ND MONTH

7 USD FOB vs. Liffe USD FOB vs. Liffe MAY DIFFS BRAZIL DIFFS SUNDRIED ETHIOPIA VS BRAZIL - primeiro fine cup mtgb washed Mai Mai Mai Mai Mai Mai - ethiopia djimmah brazil primeiro Mai Mai Mai Mai Mai Mai DIFFS COLOMBIA & PERU DIFFS CENTRALS colombia excelso peru g 3 - costa rica hb guatemala hb honduras hg salvador hg Mai Mai Mai Mai Mai Mai -3 Mai Mai Mai Mai Mai Mai DIFFS ROBUSTA DIFFS ROBUSTA vietnam gii uganda scr indo ek conillon - Mai Mai Mai Mai Mai Mai - Mai Mai Mai Mai Mai Mai