Market Report Mar 7th 2022

Dear Coffee Friends and Partners,

Happy belated 2022. From all of us at Comexim, we’d like to wish you all a wonderful coffee new year!

Around this time last year, when we published our 21/22 forecast, the pandemic was spreading through the globe and upending our way-of-life in many aspects. Now nearly two years on, and despite the roll-out of vaccines and the easing of many restrictive measures and lockdowns, it may appear that the situation is no better than a year ago. Flexible and remote working is becoming the norm, travel and supply chain disruptions persist, inflationary pressures are rattling markets, and market volatility seems to be here to stay; and perhaps a big question is how do all these challenges impact global coffee supply and demand

The consensus seems to be of general growth returning to coffee demand, with shifts across geographies, blends, and consumption channels. With that said, and as per our previous reports, the focus of this publication will not be on global supply and demand but on our Brazilian green coffee production and export forecasts for the upcoming 2022-2023 season.

As we are now at the half-way mark of the 2021/2022 coffee campaign in Brazil, let’s quickly reflect back on our reports issued during January and July 2021. This crop was already expected to be a smaller one when compared to the previous cycle, due to the natural biannual cycle of the trees, but mainly a result of prolonged periods of dryness, high temperatures, and lack of rainfall. For the current 21/22 season we have maintained our crop estimate at 54.2 million bags, split 35.25 for Arabica and 18.95 for robusta, a decrease of 30.6% and increase of 10.2%, respectively and when compared to the prior season.

Exports between July-December 2021 reached 19.43 million bags, according to Cecafe, representing a drop of 21.4% when compared to the same period as before. This is largely a result of supply chain disruptions and lack of equipment availability, but also due to the smaller crop. While logistical challenges continue on the ground, for the January-June 2022 period we are forecasting exports to reach 19.0 million bags, which would bring total exports for the 2021/2022 crop to 38.43 million bags, an overall drop of 15.9% when compared to the previous season’s record exports of just over 45 million bags.

When considering carry over from 20/21 of 6.0 million bags, and internal consumption at 21.0, we are left with a carry-out of 800 thousand bags, which is indeed a rather low number when looking at the past 5 years. (please refer to appendix 1 below)

There has been a tremendous amount of speculation with regards to the impact of the two frosts that hit the Brazilian coffee belt during the middle of last year, and then the dryness that followed suit. It is Comexim’s belief that some recovery has happened due to fantastic care and farming practices along with the rainfall that followed in August/September and all the way through to December. As such, our forecast for the upcoming 2022-2023 season is for a total crop of 63.2 million bags, split 41.1 million for Arabica and 22.1 for Robusta, and representing a 16.6% increase for both when compared to the current season estimates. (please refer to appendix 2 below).

Exports for the upcoming crop are estimated to increase by 6.7% overall to 41.0 million bags. 21.0 million bags for the July-Dec period and 20.0 million bags from Jan-June. Internal consumption has slightly increased to 21.5 million bags. When adding all the numbers up, we are left with a carry-out for 2022/2023 at 1.499 million bags, again a historically low figure by all accounts.

We recognize the wide-ranging forecasts that have recently been circulating in the market, but following our extensive field visits and surveys, this is the conclusion we have reached.

Previously mentioned adverse weather has without a doubt impacted the max potential for this upcoming crop, and while we would not quite categorize it as a recovery, good agricultural practices coupled with excellent farm-gate prices have managed to avert the worst case scenario.

On the logistics front, while challenges remain, we are starting to see signs of improvement.

Spot freight rates continue to be extremely costly, but on the other hand, booking allocations and container availability have indeed improved. All in all the flows have definitely improved in the last month or two. The situation is extremely dynamic and evolving constantly and it does appear that the improvements will continue throughout the next several months.

Despite the positive developments on the logistics side, one must still bear in mind of the other challenges that still persist in our markets. Terminal prices have surged, the coronavirus continues to spead at alarming rates, logistical challenges while easing are still remain, inflationary pressure, and let’s not forget that 2022 is a presidential election year in Brazil, a country that is already extremely polarized politically.

Never a dull moment in the coffee world!

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

Keep well and best regards from all of us,

Team Comexim

trading@comexim.com.br