coffee supply and demand

COFFEE
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
I. PRODUCTION
Brazil:
The spread of opinions on the size of the 2014/15
Brazil crop, never mind the 2015/16 one, is still
startlingly wide.
Only the full flow of the arabica harvest will bring
solid information on 2014 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.
Vietnam:
We completed our first survey of the 2014/15
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 4% 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 4% up on last year.
The 2015/16 crop has many hurdles to pass before it
is harvested.
35
After our April crop survey, we revised down our
2014/15 arabica crop estimate by 18% due to heat
and dryness. We raised our conillon estimate by 6%.
This leaves our crop estimate at 45.5 mio bags, of
which 28.4 mio bags are arabica and 17.1 mio bags
are robusta.
25
Although the market is trading the uncertainty over
future Brazil crops, let’s not forget any surprises that
could come from the finalized 2013/14 statistics.
Shipments have been ramping up markedly,
showing the good size of the last Brazil crop, and
aggressive producer selling since the beginning of
2014 pushing internal diffs to attractive levels.
Exporters have been able to book good volumes
with roasters in recent weeks.
Vietnam Coffee Exports
mio bags
30
2012/13
27.0
2013/14
23.6
forecast
20
15
10
5
0
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
15% 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 15% 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 2015 crop, as a strong El Niño has
constrained Indonesian crops in the past.
April 2014 exports hit 3 mio bags, the highest April
exports ever from Brazil. Total 2013/14 exports
could hit 34 mio bags, the second highest export
total ever.
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 13/14
season to that of the previous season, but the rate
of export slowed down in the second half.
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.
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.
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
Colombia:
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 25th May.
We use this disappearance indicator to forecast
unchanged overall coffee demand in Europe.
In stark comparison, US and Canada coffee
disappearance continues to rise, up 5.4% in the twelve
months until March 2014. We forecast demand in
North America to rise by 2.5% this coffee year, a rate
which may be on the conservative side.
27
26
Peruvian coffee export statistics have traditionally
been the most tangled to unknot in Latin America.
This season, green coffee export stats for the 2013/14
April-March crop year were published by various
sources. The most reliable sources (customs and the
exporters’ chamber) published the same figure of 4.1
mio 60kg bags. This is a very similar volume to what
we believe was exported in 2012/13, despite the
2013/14 crop being substantially larger according to
our field studies. Some 2013/14 coffee may have been
unofficially transported over the border.
European coffee disappearance continues to hover
unchanged around 40.5 mio bags.
European Union
50
48
46
mio bags
44
41.0 41.0 41.0
42
40
41.0 40.9
38
36
38.0
39.1 40.0
40.2 40.0 39.7 39.7
39.3
41.1
40.4
coffee disappearance
34
32
Volcafe coffee demand estimates
30
Sep 00 Sep 02 Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14
23.3
21.9
21.0
25.2
23.9
24.1
23
21
27.0
24.6
24
22
II. COFFEE DEMAND
26.3
25.8
25
Peru:
Continued fieldwork in the centre of the country is
indicating a much lower crop in 2014/15, similar to
our findings in the newer coffee areas in the North.
USA & Canada
28
mio bags
The strong main crop lifted official production figures
from Colombia to 6.0 mio bags in the period from OctMarch 13/14, compared to 4.4 mio bags the previous
season. Last year’s mitaca was very strong, with
official production figures at 5.3 mio bags. So far, this
year’s mitaca is not flowing as strongly and
replacement differential levels have not yet eased up.
Strong demand for Colombian coffee is present from
all directions.
24.6
24.3
23.1
22.3
coffee disappearance
Volcafe coffee demand estimates
21.0
20
Sep 00 Sep 02 Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14
Both Europe and the US are mature, high-income
markets. The last time that arabica retail prices rose,
in mid-2011, consumers shifted to robusta-heavy
products. Total coffee demand 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 demand.
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 demand 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 1990s. However, this all depends
on the fate of the Brazil crops, with 2015/16 being the
more important one.
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
Smaller Vietnamese and Indonesian crops in 2014/15,
plus continued demand growth, causes a global
robusta deficit too.
Robusta balance
10
8
14/15
115
-11
105
14/15
13/14
12/13
10/11
11/12
09/10
07/08
08/09
06/07
05/06
04/05
-12
03/04
35
demand
-10
02/03
-10
13/14
-7
-8
40
12/13
supply
-8
02/03
balance
-5
-7
50
45
-4
-6
10/11
125
-2
-4
11/12
-2
55
-1
09/10
135
0
60
1
1
1
0
08/09
3
3
0
-2
07/08
145
1
0
05/06
5
2
2
1
1
03/04
5
5
2
06/07
155
65
demand
4
mio bags
8
7
8
mio bags
165
mio bags
11
70
supply
6
Total Coffee Balance
75
balance
mio bags
After years of surplus, the 2014/15 season will see the
largest deficit in more than a decade.
04/05
III. BALANCES AND STOCKS
Most of the 2014/15 deficit is in Brazil arabica; this is
not an unusually sized shortfall. The problem is that
15/16 is likely to be a deficit too.
Global end-season coffee stocks will be the highest in
a decade by the summer 2014. Next season’s deficit
will put a dent in them, but key is 15/16.
70
Global Coffee Carryover Stocks
60
Brazil arabica balance
8
50
arabica stock
45
4
40
3
2
35
0
30
-2
13/14
12/13
11/12
10/11
08/09
09/10
07/08
06/07
04/05
05/06
03/04
02/03
After recent stock-build, the mild arabica market is in
a small deficit.
Coffee demand has risen so fast that by the end of
2014/15, global total coffee stock/demand ratios
(green line) will already be at historical lows.
28
Global Coffee Carryover Stock/Demand Ratios
26
Mild arabica balance
10
24
55
22
50
40
35
balance
14/15
13/14
14/15
13/14
12/13
11/12
10/11
09/10
08/09
07/08
06/07
05/06
04/05
03/04
25
12/13
10
-10
11/12
demand
total
12
10/11
-8
30
09/10
supply
robusta
08/09
-6
arabica
14
07/08
-3
-4
16
06/07
-2
0
05/06
-1
04/05
0
18
03/04
0
0
1
02/03
1
01/02
1
00/01
0
-2
1
0
20
99/00
2
45
mio bags
2
02/03
mio bags
4
weeks of demand
8
6
14/15
13/14
12/13
11/12
09/10
08/09
07/08
06/07
10
05/06
-9
04/05
-9
03/04
-10
-
15
demand
02/03
supply
-8
01/02
balance
-5
-6
-8
10
20
14/15
-6
20
25
-4
30
99/00
-2
40
00/01
5
4
mio bags
5
4
6
mio bags
6
mio bags
robusta stock
50
10/11
10
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
IV. TABLES
PRODUCTION BY COUNTRY
mio 60kg bags
PRODUCTION BY TYPE
2011/12
2012/13
2013/14
2014/15
2011/12
2012/13
2013/14
2014/15
Brazil
Vietnam
Colombia
Indonesia
India
Peru
Honduras
Ethiopia
Mexico
Guatemala
Uganda
Côte d’Ivoire
Costa Rica
El Salvador
Nicaragua
China
Tanzania
Others
48.0
28.0
7.0
6.2
6.0
5.1
5.8
4.8
4.3
3.6
2.8
2.0
1.7
1.3
2.0
1.0
0.6
10.0
56.8
25.3
8.5
12.1
5.8
4.3
4.7
5.1
4.4
3.6
3.7
1.7
1.7
1.2
1.8
1.2
1.1
9.6
57.2
30.0
10.0
11.3
4.9
4.6
4.1
4.7
3.9
2.7
3.2
2.0
1.5
0.6
1.4
1.0
0.9
9.5
45.5
28.0
11.0
9.7
5.7
3.3
4.5
4.7
4.0
3.0
3.6
1.9
1.4
0.8
1.4
1.0
1.0
9.7
mio 60kg bags
Arabica
Brazil
Colombia
Ethiopia
Peru
Honduras
Mexico
Guatemala
India
Others
78.3
32.3
7.0
4.8
5.1
5.8
3.2
3.6
1.9
14.4
85.5
39.3
8.5
5.1
4.3
4.7
3.3
3.6
1.8
14.8
83.9
40.7
10.0
4.7
4.6
4.1
2.8
2.7
1.6
12.8
72.6
28.4
11.0
4.7
3.3
4.5
2.9
3.0
1.8
13.0
Robusta
Vietnam
Brazil
Indonesia
India
Uganda
Others
62.1
27.2
15.7
5.2
4.1
2.0
8.1
67.4
24.6
17.5
10.6
4.0
2.8
7.9
69.5
28.8
16.5
10.5
3.3
2.4
8.1
67.6
26.8
17.1
8.8
3.9
2.9
8.1
TOTAL
140.4
152.9
153.5
140.2
TOTAL
140.4
152.9
153.5
140.2
CONSUMPTION BY REGION
mio 60kg bags
CONSUMPTION BY TYPE
2011/12
2012/13
2013/14
2014/15
EU27
41.0
41.0
41.3
41.3
Other Europe
8.3
8.4
8.6
8.7
USA & Canada
25.8
26.3
27.0
27.7
Asia
28.8
31.5
33.4
35.0
Africa
8.5
8.6
9.0
9.2
Latin America
28.5
29.3
29.4
29.5
Incremental Volume
4.2
4.3
3.6
2.8
3%
140.8
3%
145.1
2%
148.7
2%
151.5
growth
TOTAL
mio 60kg bags
BALANCE BY TYPE
mio 60kg bags
2011/12
2012/13
2011/12
2012/13
2013/14
2014/15
growth
Total Robusta
By Importers
By Brazil internal Market
By Other Coffee Producers
15%
63.1
36.2
11.2
15.7
6%
66.6
36.4
12.9
17.3
3%
68.4
37.7
11.7
19.0
1%
69.2
36.8
12.3
20.1
growth
Brazil Arabica
By Importers
By Brazil internal Market
-12%
33.8
24.8
9.1
-1%
33.6
25.8
7.8
8%
36.3
27.5
8.8
4%
37.8
29.6
8.2
growth
Non-Brazil Arabica
By Importers
By Coffee Producers
1%
43.9
36.9
7.0
2%
44.9
37.6
7.3
-2%
44.0
36.4
7.6
1%
44.5
36.5
8.0
TOTAL
140.8
145.1
148.7
151.5
STOCK CHANGE THROUGH SEASON
2013/14
2014/15
4-yr balance
-0.7
mio 60kg bags
2011/12
2012/13
2013/14
2014/15
Robusta Balance
-1.0
0.8
1.1
-1.6
Robusta Stock Change
-2.5
0.0
1.1
-1.6
Production
62.1
67.4
69.5
67.6
in consumer port
-4.2
0.1
0.1
-1.1
Consumption
63.1
66.6
68.4
69.2
in origin location
1.7
-0.1
1.0
-0.5
Brazil Arabica Balance
-1.5
5.7
4.4
-9.4
Brazil Arabica Stock Change
-2.0
5.9
4.4
-9.4
Production
32.3
39.3
40.7
28.4
in consumer port
-0.1
0.4
1.2
-1.4
Consumption
33.8
33.6
36.3
37.8
in origin location
-1.9
5.5
3.2
-8.0
Non-Brazil Arabica Balance
-0.8
2.1
1.3
-0.8
-0.3
Non-Brazil Arabica Stock Change
1.5
0.9
-0.8
-0.3
Production
46.0
46.2
43.2
44.2
in consumer port
1.4
1.3
-0.8
-0.3
Consumption
43.9
44.9
44.0
44.5
in origin location
0.1
-0.4
0.0
0.0
Total Arabica Balance
2.3
0.5
7.0
3.6
-9.7
Total Arabica Stock Change
-0.5
6.8
3.6
-9.7
Production
78.3
85.5
83.9
72.6
1.4
in consumer port
1.3
1.7
0.5
-1.7
Consumption
77.7
78.5
80.3
82.3
in origin location
-1.8
5.1
3.2
-8.0
TOTAL
-0.4
7.8
4.7
-11.3
Total
-3.0
6.8
4.7
-11.3
0.7
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
IV. PRICES
NEW YORK ARABICA AND LONDON ROBUSTA: SPOT MONTH CONTINUATION
NEW YORK ‘C’ ARABICA - LONDON LIFFE ROBUSTA: ARBITRAGE 1ST MONTH - 1ST MONTH
BRAZIL BM&F ARABICA – NEW YORK ‘C’ ARABICA: ARBITRAGE 1ST MONTH – 2ND MONTH
SUPPLY AND DEMAND
QUARTERLY REPORT
MAY 2014
DIFFS SUNDRIED ETHIOPIA VS BRAZIL 2004-2014
40
40
20
20
0
0
cts/lb FOB vs. ‘C’
cts/lb FOB vs. ‘C’
DIFFS BRAZIL 2004-2014
-20
-40
primeiro
fine cup mtgb
-60
-20
-40
-60
ethiopia djimmah 5
brazil primeiro
washed
-80
Mai 04
Mai 06
Mai 08
Mai 10
Mai 12
-80
Mai 04
Mai 14
DIFFS COLOMBIA & PERU 2004-2014
60
colombia excelso
cts/lb FOB vs. ‘C’
cts/lb FOB vs. ‘C’
peru g1
80
60
40
20
Mai 08
Mai 10
Mai 12
Mai 14
DIFFS CENTRALS 2004-2014
120
100
Mai 06
costa rica hb
50
guatemala hb
40
honduras hg
30
salvador hg
20
10
0
-10
0
-20
-20
Mai 04
Mai 06
Mai 08
Mai 10
Mai 12
-30
Mai 04
Mai 14
DIFFS ROBUSTA 2004-2014
Mai 08
Mai 10
Mai 12
Mai 14
DIFFS ROBUSTA 2004-2014
800
1400
vietnam gII
600
uganda scr 15
1200
indo ek80
conillon
1000
USD FOB vs. Liffe
USD FOB vs. Liffe
Mai 06
400
200
0
800
600
400
200
0
-200
-200
-400
Mai 04
Mai 06
Mai 08
Mai 10
Mai 12
Mai 14
-400
Mai 04
Mai 06
Mai 08
Mai 10
Mai 12
Mai 14