COFFEE SUPPLY AND DEMAND

COFFEE
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
FOCUS
Arabica is moving into the second season of surplus,
with the prospect of a third to come. Robusta, on
the scale of things, is still balanced. Price-wise,
arabica is two-and-a-half years into a bear market.
Robusta is at the time of writing still trading in a
range.
This arabica surplus and robusta balance haven’t
changed since our last quarterly, but some
underlying production figures have been adjusted
due to crop survey results or statistical evidence.
Robusta: We’ve revised down our 13/14 Brazil
robusta figure by 0.6 mio bags on our yield survey,
and revised down our 12/13 Vietnam robusta
estimate by 0.5 mio bags on the basis of almostfinalized statistics. Indian 13/14 robusta production
forecast is also revised down by 0.4 mio bags on
(ongoing) crop survey results. Indonesian and
Vietnam 13/14 expectations are unchanged.
Arabica: our Brazilian expectations are unchanged,
for both 12/13 and 13/14. We’ve revised up
Guatemalan, Costa Rican and Nicaraguan production
estimates for 12/13 on evidence of large exports, to
the sum of 0.5 mio bags, while Honduran and Papua
New Guinean production estimates have been
revised down by 0.6 mio bags in total. For 13/14, the
latest crop survey puts Peru production 0.6 mio bags
higher, and Guatemalan production 0.3 mio bags
lower, than our original pencilled-in figures.
Honduran results came in unchanged on
expectations. Our expectations that CAM royainduced losses will be stronger in 13/14 over 12/13
are unchanged. And last but not least, Colombia.
‘ figure has been adjusted upwards for
Our 12/13
reasons noted below, and for 13/14, our newly
completed crop survey has noted the big
contribution of renovated area coming back online.
I. COFFEE ORIGINS
Brazil:
The Brazilian coffee market had an eventful quarter.
There was a long build up to the final announcement
of a put option program. Three million bags are to
be covered by government-issued puts, at a strike
price of 343 reais per bag, but the fine details have
still not been released. Another 2 million bags
“could” be purchased by the government at the
minimum price of 307 reais per bag. There was a
strong frost in the Parana coffee areas, with up to
500,000 bags of 14/15 crop potential removed. Most
importantly, the Brazilian currency has devalued
sharply (16% in just one quarter), due to a faltering
domestic economy, and the US Fed’s tapering of its
loose monetary policy.
Despite the ‘C’ market falling by twenty cents or
more since May, the Brazilian internal market is
trading in the same range as the weak currency
cancels out the losses. Fine-cupping running lots are
still trading between 280 and 300 reais per bag, as
they were three months ago.
There is plenty of old crop and new crop being
offered by producers, but the top qualities (cup and
screen) are scarce. Producers tend to store these
coffees for sales later in the season. There has been
a fair amount of rain during the harvest, and this
also could have had an effect – time will tell. Riocupping coffee has finally come down in price, after
a squeeze pre-harvest.
Our expectations for the 13/14 conillon crop is 0.6
mio bags lower, due to de-husking yields being even
lower than our already-conservative estimate.
Arabica expectations are unchanged.
The big question is now the potential of the 14/15
crop. In our opinion, 60 mio bag+ is possible. New
productive tissue in the main coffee areas was very
good, as observed in our last field survey. The July
frost in Parana has reduced some productive
potential, and there is a whole flowering season to
get through, but the odds of a record 14/15 Brazil
crop are good.
Vietnam:
Green robusta exports are down 14% OctoberAugust at 21.7 mio bags, while green arabica exports
are up 1% to 0.8 mio bags. Soluble exports are up
50% this season to 0.3 mio bags green bean
equivalent, as big new processing projects come
online. Important destinations of these soluble
exports are China, Cambodia and the Philippines.
Green differentials have been positive and firm all
season, only recently softening, and farmers are
seeing a price well above cost of production. We
forecast total exports in 12/13 at 23.8 mio bags, and
internal consumption at 1.7 mio bags. We think
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
farmer carryover stock will have risen by 0.5 mio bags
through the season.
The next crop is due to be a record. Rainfall has been
above average, and the usual exceptional husbandry
and inputs have been applied. Area is being renovated
and is expanding. The price of robusta is trading well
above cost of production. Our first main crop survey in
June, plus the two smaller surveys in April and August
have all provided evidence for a crop in the region of
30 mio bags.
Indonesia:
The 13/14 Indonesian crop is still estimated at 10.5
mio bags, down 10% on last year. Exports from
Panjang port have been on target, despite excessive
rainfall causing some delays. The protracted harvest is
only recently over in most areas. The quality of the
crop has been problematic due to moisture. May-July
exports reached 1.8 mio bags, up more than a third on
2012, but the rate of shipment for the rest of the year
is not expected to match the huge exports of last
season. Total green exports from Indonesia are
expected to reach 6.2 mio bags in 13/14 (of which 1.3
mio bags arabica). Soluble coffee exports from
Indonesia are rapidly accelerating, with other Asian
markets the main destinations.
Green differentials have really weakened in recent
weeks, coming back into line with Vietnamese diffs.
Along with new crop pressure, part of the reason is
Indonesia’s own forex adventures, with the rupiah
weakening by around 15% in the last three months.
stands at 8.5 mio bags. Although the total availability
of Colombian coffee seems to exceed our own number
by 1 mio bags, our own research does not allow us to
conclude that such surplus could have been harvested
from the current installed capacity. The Colombian
differential premium and the 40 cts/lb subsidy may
have provided the incentives to attract additional
flows into Colombia from the outside.
Much newly renovated area is back in production.
Newly planted seedlings start to produce something
after eighteen months, and are back to full commercial
production in Colombia at thirty months. Planting (and
pruning) is normally done in either March or October,
the dry months. Some replanting was done in 2010,
but much more in 2011 and even more in 2012. We
see 13/14 production up at 9.5 mio bags as this area
returns to production.
Guatemala and Honduras:
Guatemalan 13/14 production will be low. Leaf rust
and a prolonged dry season in the east, which
negatively affected fruit set, mean that Guatemalan
production next season could be 2.4 mio bags. In
Honduras, the multi-year area expansion trend
continues. Although the rust problem has been
managed better than in other Central America
countries, the effects of the disease are still evident in
our 13/14 Honduras forecast of 4.0 mio bags.
II. COFFEE DEMAND & STOCKS
Colombia:
Stats for 12/13 suggest that robusta consumption has
been completely flat in importing countries. Robusta
demand in producing countries has grown by 13% in
12/13. Total robusta demand grew by 6%. Arabica
demand in importing countries grew by 3% in 12/13,
but fell by 7% in producing countries (mostly a
substitution effect in Brazil). Overall arabica demand
growth was 1%. In the 13/14 season we see total
robusta demand growing by 3%, but only by 1% in
importing countries. Global arabica demand grows by
4% in 13/14. This arabica number is split out by a 11%
growth in Brazilian arabica demand and a 2% fall in
mild arabica demand, based on a supply fall.
Official production statistics are suggesting that 12/13
output will hit around 9.5 mio bags for the full season.
Based on export figures and acknowledging the
incremental contributions from the renovated
hectares entering into production, we have decided to
revise upwards our 12/13 estimate. Our number now
Robusta stocks have risen by 0.9 mio bags through
12/13, of which 0.3 mio bags was a rise in consumer
port stocks. The 13/14 season should be similar.
Arabica stocks have risen 7.4 mio bags through 12/13,
of which 2.0 mio bags was a rise in consumer port
stocks. The 13/14 season should be a second surplus.
India:
This year’s monsoon has been very strong. Rains in
Karnataka, the largest coffee state, have been 20%
above normal. We are currently halfway through our
first crop survey of the season, and it is so far obvious
that excess moisture has negatively affected both the
arabica and the robusta crop. Our pencilled-in crop
estimate for 13/14 is 5.3 mio bags, down 7% on last
year. The Indian rupee has devalued massively (-22%)
in the last three months. Differentials have
consequently softened.
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
PRODUCTION BY COUNTRY
PRODUCTION BY TYPE
mio 60kg bags
2011/12
2012/13
2013/14
Brazil
Vietnam
Indonesia
Colombia
India
Ethiopia
Peru
Honduras
Mexico
Uganda
Guatemala
Côte d’Ivoire
Costa Rica
Nicaragua
China
El Salvador
Tanzania
Others
48.0
28.0
6.2
7.0
6.0
4.8
5.1
5.7
4.3
2.8
3.6
2.1
1.7
2.0
1.0
1.3
0.6
11.9
56.8
26.0
11.7
8.5
5.7
5.1
4.3
4.7
4.5
3.4
3.8
1.5
1.7
1.8
1.2
1.2
1.1
12.0
57.2
30.0
10.5
9.5
5.3
4.9
4.6
4.0
3.9
3.2
2.4
1.9
1.4
1.4
1.2
0.9
0.9
11.4
TOTAL
140.3
152.7
152.8
CONSUMPTION BY REGION
mio 60kg bags
2011/12
2012/13
2013/14
Arabica
Brazil
Colombia
Ethiopia
Peru
Honduras
Mexico
Guatemala
India
Others
78.1
32.3
7.0
4.8
5.1
5.7
3.2
3.6
1.9
14.4
85.5
39.3
8.5
5.1
4.3
4.7
3.4
3.8
1.8
14.7
84.0
40.7
9.5
4.9
4.6
4.0
2.7
2.4
1.8
13.4
Robusta
Vietnam
Brazil
Indonesia
India
Uganda
Others
62.2
27.2
15.7
5.2
4.1
2.0
8.1
67.2
25.3
17.5
10.2
3.9
2.6
7.7
68.8
29.1
16.5
9.2
3.5
2.4
8.2
TOTAL
140.3
152.7
152.8
CONSUMPTION BY TYPE
2011/12
2012/13
2013/14
mio 60kg bags
growth
15%
6%
3%
EU27
40.7
40.8
40.9
Total Robusta
62.8
66.3
68.0
Other Europe
8.3
8.6
8.8
growth
-13%
0%
11%
Brazil Arabica
33.4
33.3
37.0
mio 60kg bags
North America
25.8
26.6
27.2
Asia
28.6
30.9
33.3
Africa
8.2
8.3
8.8
growth
Latin America
Extra Volume Coffee
Consumption Per Year:
growth
TOTAL
28.5
29.3
30.0
3.6
4.4
4.5
3%
140.1
3%
144.5
3%
149.0
BALANCE BY TYPE
mio 60kg bags
Robusta Balance
Production
Consumption
Non-Brazil Arabica
2011/12
2012/13
2013/14
1%
2%
-2%
43.9
44.9
44.0
growth
-5%
1%
4%
Total Arabica
77.3
78.2
81.0
Market Share
Robusta
Brazil Arabica
Non-Brazil Arabica
45%
24%
31%
46%
23%
31%
46%
25%
30%
140.1
144.5
149.0
TOTAL
STOCK CHANGE THROUGH SEASON
2011/12
2012/13
2013/14
-0.6
62.2
62.8
0.8
67.2
66.3
0.8
68.8
68.0
2011/12
2012/13
2013/14
Robusta Stock Change
consumer port
of which exchange-certified
origin
-2.5
-4.2
-4.0
1.7
0.9
0.3
-0.6
0.5
0.8
0.8
mio 60kg bags
0.0
Brazil Arabica Balance
Production
Consumption
-1.1
32.3
33.4
6.0
39.3
33.3
3.7
40.7
37.0
Brazil Arabica Stock Change
consumer port
origin
-2.0
-0.1
-1.9
6.0
0.4
5.6
3.7
0.1
3.7
Non-Brazil Arabica Balance
Production
Consumption
1.9
45.8
43.9
1.3
46.2
44.9
-0.7
43.3
44.0
Non-Brazil Arabica Stock Change
consumer port
of which exchange-certified
origin
1.5
1.4
0.7
0.1
1.3
1.5
0.6
-0.2
-0.7
-0.7
0.0
Total Arabica Balance
Production
Consumption
0.8
78.1
77.3
7.4
85.5
78.2
3.0
84.0
81.0
Total Arabica Stock Change
consumer port
origin
-0.6
1.3
-1.8
7.4
2.0
5.4
3.0
-0.7
3.7
TOTAL
0.2
8.2
3.8
Total
-3.0
8.2
3.8
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
NON-BRAZIL ARABICA SUPPLY/DEMAND
15.0
BRAZIL ARABICA SUPPLY/DEMAND
60
15.0
balance
55
supply
10.0
demand
45
demand
50
40
5.0
0.0
40
goo
35
35
0.0
30
25
-5.0
20
30
-10.0
-10.0
15
25
-15.0
-15.0
20
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
10
02/03
13/14
03/04
TOTAL ARABICA SUPPLY/DEMAND
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
15.0
95
75
balance
balance
supply
90
70
10.0
demand
supply
85
5.0
80
75
60
mio bags
0.0
65
demand
5.0
mio bags
mio bags
05/06
TOTAL ROBUSTA SUPPLY/DEMAND
15.0
10.0
04/05
0.0
55
70
-5.0
50
-5.0
65
-10.0
60
-15.0
55
13/14
-15.0
ARABICA PRICE VS STOCK/DEMAND RATIO
13/14
Stock-demand ratios (% quarterly demand)
120%
1'500
100%
1'000
80%
robusta price
500
60%
robusta stock/demand ratio
Sep 15
Sep 14
40%
Sep 13
Sep 12
Sep 15
Sep 14
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08
Sep 07
Sep 06
Sep 05
80%
Sep 04
12/13
140%
100%
arabica stock/demand ratio
Sep 03
11/12
2'000
Sep 11
120%
Sep 02
10/11
160%
100
-
09/10
2'500
140%
arabica price
08/09
200%
160%
Sep 01
07/08
180%
150
Sep 00
06/07
3'000
180%
cts/ lb
05/06
220%
200
50
04/05
USD / tonne
250
03/04
ROBUSTA PRICE VS STOCK/DEMAND RATIO
Stock-demand ratios (% quarterly demand)
300
35
02/03
Sep 10
12/13
Sep 09
11/12
Sep 08
10/11
Sep 07
09/10
Sep 06
08/09
Sep 05
07/08
Sep 04
06/07
Sep 03
05/06
Sep 02
04/05
40
Sep 01
03/04
-10.0
Sep 00
02/03
45
mio bags
-5.0
mio bags
45
mio bags
mio bags
5.0
mio bags
supply
10.0
50
balance
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
EUROPEAN UNION
44
USA & CANADA
27
Rolling coffee disappearance
Volcafe demand estimates
26
42
mio bags
41.0
40.5
41
40.0
40.2
40.5
40.2
40.0
39.7
40
24.6
23.9
40.7 40.8
24
23.1
23
39
22
38
21
37
20
25.8
Volcafe demand estimates
25
41.2
40.9
mio bags
43
26.5
Rolling coffee disappearance
25.2
24.6
24.3
24.1
23.3
22.3
JAPAN & SOUTH KOREA
4.6
8.6
8.7
8.7
8.7
Sep 13
Sep 12
Sep 11
4.5
4.4
4.2
4.1
8.5
3.5
3.5
3.3
3.3
7.5
3.5
Sep 06
4.0
8.3
8.2
Sep 05
8.3
4.6
mio bags
mio bags
8.5 8.3
4.8
Volcafe demand estimates
Volcafe demand estimates
8.6
Sep 10
Rolling coffee disappearance
5.0
Rolling coffee disappearance
8.6
Sep 09
RUSSIA & UKRAINE
9.5
8.6
Sep 08
Sep 07
Sep 06
Sep 05
Sep 04
Sep 03
Sep 02
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08
Sep 07
Sep 06
Sep 05
Sep 04
Sep 03
Sep 02
21.0
ALGERIA, MOROCCO & EGYPT
2.5
1.1
1.2
Sep 06
1.1
1.2
Sep 05
1.0
Sep 04
1.5
2.7
Sep 03
2.4
2.8
2.7
1.5
mio bags
mio bags
2.9
2.4
Sep 13
Sep 12
Sep 11
1.9
1.8
3.2
3.0
2.6
Sep 10
Volcafe demand estimates
Volcafe demand estimates
2.5
Sep 09
Rolling coffee disappearance
Rolling coffee disappearance
2.6
Sep 08
AUSTRALIA & NEW ZEALAND
4.0
3.0
Sep 07
Sep 04
Sep 03
Sep 02
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08
Sep 07
Sep 06
Sep 05
Sep 04
Sep 03
Sep 02
3.0
1.2
1.3
1.6
1.4
2.5
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08
Sep 07
Sep 02
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08
Sep 07
Sep 06
Sep 05
Sep 04
Sep 03
0.5
Sep 02
2.0
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
The Brazil Farmer Perspective:
NEW YORK ‘C’ ARABICA: 1st MONTH CONTINUATION EXPRESSED IN BRAZIL REAL
The Roaster Choice:
NEW YORK ‘C’ ARABICA - LONDON LIFFE ROBUSTA: ARBITRAGE 1ST MONTH - 1ST MONTH
The Roaster Choice:
BRAZIL BM&F ARABICA – NEW YORK ‘C’ ARABICA: ARBITRAGE 1ST MONTH – 2ND MONTH
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
BRAZILIAN REAL PER USD
COLOMBIAN PESO PER USD
2'000
2.5
2.4
1'950
2.3
1'900
2.1
COP/ USD
BRL / USD
2.2
1'850
2.0
1.9
1'800
1.8
1.7
1'750
1.6
1.5
Aug 11
Aug 12
1'700
Aug 11
Aug 13
PERUVIAN SOL PER USD
Aug 12
Aug 13
INDIAN RUPEE PER USD
70.0
2.9
2.8
65.0
2.8
2.7
INR / USD
PEN / USD
60.0
2.7
55.0
50.0
2.6
45.0
2.6
2.5
Aug 11
Aug 12
40.0
Aug 11
Aug 13
INDONESIAN RUPIAH PER USD
Aug 12
Aug 13
VIETNAMESE DONG PER USD
11'500
21'300
11'000
21'200
21'100
10'500
VND / USD
21'000
IDR / USD
10'000
9'500
20'900
20'800
9'000
20'700
8'500
8'000
Aug 11
20'600
Aug 12
Aug 13
20'500
Aug 11
Aug 12
Aug 13
SUPPLY AND DEMAND
QUARTERLY REPORT
AUGUST 2013
DIFFS BRAZIL 93-13
DIFFS PERU 93-13
40
40
20
30
0
20
MCM (Grade 2)
cts/lb FOB vs. ‘C’
cts/lb FOB vs. ‘C’
Grade 1
-20
primeiro
-40
10
0
fine cup mtgb
washed
-60
-10
-80
-20
Jul 93
Jul 95
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 93
Jul 13
DIFFS COLOMBIA 93-13
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 13
DIFFS CENTRALS 93-13
120
50
100
40
excelso
30
supremo
20
80
costa rica hb
guatemala hb
honduras hg
salvador hg
cts/lb FOB vs. ‘C’
cts/lb FOB vs. ‘C’
Jul 95
60
40
20
10
0
-10
0
-20
-20
-30
Jul 93
Jul 95
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 93
Jul 13
DIFFS ROBUSTA 93-13
800
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 13
DIFFS AFRICA/ASIAN ARABICA 93-13
kenya ab faq
250
vietnam gII
ethiopia sidamo 2
indo ek80
600
Jul 95
200
ethiopia djimmah
uganda scr 15
png y-grade
150
cts/lb FOB vs. ‘C’
USD FOB vs. Liffe
400
200
tanzania ab south
100
50
0
0
-200
-50
-400
Jul 93
-100
Jul 95
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 13
Jul 93
Jul 95
Jul 97
Jul 99
Jul 01
Jul 03
Jul 05
Jul 07
Jul 09
Jul 11
Jul 13