Crop Report 2022/2023

Santos, february 03, 2023

Dear Coffee Friends and Partners,
We hope that you have enjoyed a good start to 2023. Just recently, billions of people across the globe have also ushered in the Lunar New Year, welcoming the Year of the Rabbit (or year of the cat in Vietnam), which symbolises longevity, peace, and prosperity. With that in mind, and from all of us at Comexim, we just wanted to start out by wishing you, your families, and your respective business segments in the coffee supply chain a wonderful Lunar New Year.

At this time last year, and looking ahead to the 22/23 Brazil coffee crop, the world was still dealing with covid-19 related measures, logistical disruptions, high shipping costs, weather impacted coffee crops, conflict in Ukraine, inflationary and recession fears, and the list goes on and on. While some are sorted (or being sorted) and in our rear-view mirror, others persist, potentially setting the stage for what could be a year of continued volatility in global markets.

Various crop reports for the Brazilian 2023/2024 coffee season have been making the rounds as of late. What is interesting to note is that the range of crop estimates between lowest and highest are extremely wide. Arguably one of the widest reported for total crop estimates. We account for a difference for 20mln bags between the lowest and highest estimates.

Before we get into the new crop numbers, let’s quickly look back at our projections for the current 22/23 cycle. Over the past year we have been gradually reducing our crop number and are now estimating 58.05mln bags for the current season, split 35.65 for arabica and 22.40 for robusta. Perhaps we were originally a bit too optimistic in the recovery and underestimated the weather impacts prior and feel this is now more in line with what we are seeing in terms of internal flows and exports.

Exports for the 1st half of the season July-22 to Dec-22 have totalled 19.34 mln bags, and while we expect exports to decline month-on-month over the Jan-23-June-23 period to approx. 17.5 mln bags. We are forecasting total to be just shy of the 37 mln bag mark. Domestic consumption we estimate to be unchanged at 21.5mln bags, and thus leaving a rather small carry-over of 564’075 bags coming into the 23/24 season.

Given the current tightness we are seeing in availability and price differentials, we are not anticipating any additional revisions to our numbers for 2022/2023, and hope that the remaining export figures for the season will further validate these estimates. (Kindly refer to Appendix 1 below for the summary).

For the upcoming 2023/2024 coffee season, we are considering a 10.2% overall increase over this current season. This represents a total crop estimate of 64.0 million bags, split between 41.3 mln bags of Arabica and 22.7 mln bags of Conilon; or a 15.8% increase in arabica and 1.3% increase in robusta versus the previous season. As one would expect given the volatile weather over the past year or so, there are indeed interesting differences in the variations when looking at the individual regions, (kindly refer to Appendix 2 below)

Exports for the new crop we are estimating to reach 41.5mln bags throughout the season, representing a 12.6% increase vs the previous one. The split of exports is 20.8 mln bags between July-Dec 23, and 20.7mln bags between the inter-crop Jan-June 24 period. We have increased domestic consumption by 500K to 22.0 mln bags. Considering the carry-out from 22/23 of 564K bags, we are estimating basically a carry out of just over 1 mln bags for 23/24. (kindly refer to appendix 1 below).

Most weather concerns, particularly rainfall, have subsided, and the picture for this upcoming season is becoming clearer. Again, we recognize the wide-ranging forecasts that have recently been circulating in the market and would say we are sort of mid-range from what we have seen. As a result of our estimates, we expect that volatility, both in terminal markets and differentials, is likely to persist in the short-term.

It is also important to point-out that the 23/24 coffee crop in Brazil, is an off-cycle year. Meaning that should all factors fall into place (price, weather, etc), we could be setting the stage for an even bigger 24/25 season.

Our estimates are based on extensive field visits and surveys, and as usual, we refrain from discussing global supply and demand numbers here. The purpose of this report is to simply to share our views and projections on Brazilian coffee, which is where we feel our expertise is.

We remain at your disposal should you wish to discuss the above in more detail or require further clarifications.

Keep well and best regards from all of us,

Team Comexim
trading@comexim.com.br

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