eVolcafe lifts estimate for drain on Brazil’s arabica stocks

The strong pace of Brazilian coffee exports, after a two-season production downturn to drought, has meant the drain on arabica inventories reaching 12m bags, far more than previously expected, Volcafe said.

The coffee house raised by 1.4m bags to 7m bags its forecast for Brazil’s arabica deficit last season, and by 2.2m bags to 5m bags the estimate for the shortfall in 2015-16, citing bumper exports, which are being encouraged by the weaker real.

“Very good prices in Brazilian currency terms provoked significant selling in the past year and this has kept shipments elevated,” Volcafe said.
Brazil’s overall coffee exports including robusta beans rose by 1.8% in 2014-15, which ended in September, to a record 36.3m bags, according to the International Coffee Orga nisation, despite a sharp drop in production thanks to longstanding drought last year.

Brazil’s combined arabica and robusta coffee output fell by 8m bags to 49.2m bags in 2014, and by a further 900,000 bags this year, according to Volcafe.

Slowdown ahead?

The ongoing run down in Brazil’s arabica stocks followed an inventory build during two seasons of significant production surplus, Volcafe noted.
Nonetheless, with the arabica output surplus in those seasons totalling 9.5m bags, Brazil’s export pace will slow as 2015-16 proceeds.

“We anticipate that as the stocks are run lower, less selling will result in exports shifting closer to the eight-year average by season’s end.”
The point at which Brazil’s coffee supplies tighten enough to squeeze exports has been long awaited by traders – both from an academic point of view, in indicating exactly how big stocks were (with even official Brazilian data on coffee treated with some scepticis m), and in potentially opening the door to higher world prices.

World estimates

The comments came in a report in which Volcafe downgraded its estimates for global coffee production deficits in both 2015-16, by 1.3m bags to 5.1m bags, and in 2015-16, by 1.2m bags to 2.3m bags.

The revisions reflected higher estimates for output both last season, upgraded by 800,000 bags to 144.6m bags, and in 2015-16, lifted by 400,000 bags to 150m bags.

While the estimate for Vietnam’s harvest this season was cut by 300,000 bags to 29.7m bags, following persistent dry weather, crops in India and Uganda were upgraded.