USDA estimate for Brazilian robusta coffee crop higher than CONAB

US officials were overoptimistic even in pegging the Brazilian robusta coffee crop at a seven-year low, industry officials believe, as the dent to supplies helped local prices return above R$400 a bag.

The USDA two weeks ago, in a much-watched report, estimated the Brazilian robusta crop at 12.1m bags, a drop of 1.2m bags year on year, with the decline attributed to “above-average temperatures and prolonged dry spells in Espirito Santo”, the country’s top state for producing the variety.

“Water shortages continue to limit irrigation, a common practice in the state.”

However, even that figure, which would be the lowest since 2009, may be too big, according to a survey by research institute Cepea.

USDA vs Conab

“For robusta, most agents consulted… did not believe Brazil may produce 12.1m bags this crop as estimated by the USDA,” Cepea said.

“For them, the numbers from Conab were closer to reality,” with the Brazilian ag bureau pegging the harvest at 9.4m bags.

The comments represent a reversal of typical market thinking, with many investors viewing Conab forecasts as consistently underestimating crop size, and preferring to rely on data from private commentators or the USDA.

Indeed, on arabica beans, Cepea said that the USDA’s forecast of a 43.9m-bag crop was well received. Conab has pegged Brazilian arabica production at 40.3m bags.

‘Low quality’

The concerns over Brazilian robusta coffee production come towards the end of a harvest which Cepea said had come in with “damaged” quality, besides lower volumes.

“The dry weather in Espirito Santo reduced production,” the institute said, adding that in Rondonia, “the quality of beans harvested was low”.

And there are some concerns that the persistent drought could affect the 2017 harvest, in reducing the vegetative growth needed to support the crop.

Haroldo Bonfa, at consultancy Pharos Consulatoria, has reportedly said that Brazil’s “entire” robusta crop “may be compromised” if rains do not arrive in the second half of 2016.

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Reuters: 64% of Brazil’s Crop Harvested Already

Brazil’s 2016-17 coffee crop 64 percent harvested

Brazil’s 2016-2017 coffee crop is 64 pct harvested as of July 19, up from 62 pct a year ago but slightly lagging the average harvest rate of 65 pct at this period, local crop analysts Safras & Mercado said on Thursday. Safras estimates the bumper crop at 54.9 million 60-kg bags, made up of 42.8 million bags of arabica and 12.1 million bags of conillon, the local variety of robusta.

Harvest in Minas Gerais, the state that accounts for half of Brazil’s coffee output, is 55 pct completed, just ahead of the 54 pct average for the state. Espirito Santo, Brazil’s No 2 coffee state and top conillon producer, has already 83 pct of its crop harvested. Gil Barabach, coffee specialist at Safras, said, with the conillon harvest nearing an end, “the sense is that production is below expectations”. He said moderate frosts earlier this week appear to have only hit isolated areas on lower slopes.

Copyright Reuters, 2016

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Vietnamese Farmers Have Sold Much More of their crop

The lengthening coffee price rally is likely to have prompted growers in Vietnam, the biggest producer of robusta beans, to sell the largest portion of their crop in four years.

Vietnamese farmers sold 86 per cent of the crop produced so far in the 2015-16 season at the end of June, according to the median estimate in a Bloomberg News survey of six traders. That would be the most since 2011-12 and compares with 70 per cent at the same stage last harvest.

Robusta, used to make instant coffee, capped a fifth monthly rise in June in the longest such run since 2014 as El Nino-induced drought crimped supply. Exports from Vietnam in the first half this year jumped 40 per cent to 987,000 metric tons from a year earlier, statistics office data show.

“Prices continued to rise last month so sales were progressing very well,” said Phan Hung Anh, deputy director of Anh Minh Co, a coffee trader in Dak Lak.

 

Futures slipped 0.6 per cent to US$1,749 a metric ton on ICE Futures Europe on Wednesday after the most-active contract touched a one-year high of US$1,773 on July 4.

Output in the season starting October is still forecast at a four-year low of 1.5 million tons, the survey shows. The next harvest will be impacted by “very dry weather from the end of October until mid-May” said Alexander Gruber, director and chief representative of RCMA Asia Pte Ltd’s Vietnam office.

July rainfall in the Central Highlands, the country’s coffee belt producing about 90 per cent of the crop, is forecast to be 15 to 30 per cent below historical averages, according to the National Center for Hydro-Meteorological Forecasting.

“We also have to keep in mind that more and more farmers are planting pepper in between coffee as it pays much higher,” Mr Gruber said. So while the acreage will stay the same, coffee yields will go down, he said. Local pepper prices are about four times higher than robusta.

Unsold stocks held by farmers at the end of June are estimated at 230,000 tons, compared with 480,000 tons a year ago, the survey shows.

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With Dry Weather in Espiritu Santo, the perspective for the conillon crop is getting worse

Brazilian robusta production forecasts are being cutted, due  to continued dry weather in Espirito Santo, Brazil’s top robusta growing state.

Trading  company  Terra Forte announced that the ”situation remains as bad as it could be in Espirito Santo, reinforcing our view that the 2017-18 crop will be severely affected once again” and dropped its ideas of the Brazilian robusta crop by 2.4m bags, to 10.4m bags, a reduction of some 22% year on year.

IBGC cuts prospects

This week the Brazilian statistics agency forecast coffee production in Espirto Santo at a 12-year low 5.28m bags, down 16% from its estimate last month.

Brazil’s total coffee output was seen at 48.8m bags, compared to 49.6m bags forecast last month.

In May, the US Department of Agriculture saw robusta production at 12.1m tonnes, down 9% year on year, noting “above-average temperatures and prolonged dry spells in Espirito Santo”.

Spread remains wide

Robusta coffee, which is cheaper than arabica, is blended into coffee in order to keep costs down.

Tight robusta supplies in Brazil will also impact arabica exports, as it will lead to supplies of the latter being diverted into the domestic market in order to make up for shortfalls of the former.

But as arabica prices rally, the spread between robusta and arabica has widened to above 60 cents a pound, the highest level since March last year.

This will incentivise roasters and blenders to keep up robusta purchases, despite the rise in prices.

September robusta futures in London were up 0.3%, at $1,822 a tonne, in afternoon deals.

This is below the highs of earlier this month, but it is otherwise the highest since June 2015.

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Expensive price of a coffee cup? Not really, check the inflation adjusted price!

In 2012, more than 75 percent of Americans reported that they prefer coffee over tea, along with millions of others around the world. While some regions of the globe favor tea as their stimulant of choice — like Russia, China and India – the Americas gravitate toward a cup of joe.

Although the percentage of coffee consumption in the U.S. has remained stable for decades, the cost of a cup of coffee has not. MooseRoots, powered by Graphiq, set out to find how much Americans spent on their coffee every year since 1967. Using data from Square, Inc. and the Bureau of Labor Statistics’ consumer price index, data analysts found trends in rising and falling prices for the past half-century

 

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Surges in coffee prices can often be attributed to differing weather patterns and freezes in coffee-growing regions. In 1977, coffee prices reached an all-time high, soaring to an inflation-adjusted price of $6.28 after frost destroyed Brazil’s coffee bean crops. Nine years later, in 1986, Americans saw another spike in prices when demand for coffee surged beyond the available supply. The causes? A volcanic eruption in Colombia and a drought in Brazil, which damaged crops.

Americans have also experienced times of depressed coffee prices, often viewed as a relief to consumers’ pockets, but a burden to coffee-growing regions. Overproduction of beans in 2004 greatly exceeded demands for the crop, causing a steep fall in coffee prices. A cup of coffee only cost $1.95 – $2.51 when adjusted for inflation. This period of depressed coffee prices is known as “The Coffee Crisis.” Researchers from the International Coffee Organization found detrimental impacts of the crisis in coffee-growing regions. People abandoned their farms, lost their jobs and migrated from the countryside to cities, which reduced export earnings.

Despite variable costs for a cup of coffee, the industry remains strong. Folgers Coffee Company, a staple American coffee brand, has been around since 1850 – when it emerged out of the California Gold Rush. Other coffee conglomerates like Peet’s Coffee and Tea and Starbucks got their start more recently, with the latter setting up shop at Pike Place Market in Seattle in 1971. Starbucks has since grown to over 24,000 locations worldwide. Check out the table below to see the average yearly price of a cup of coffee since 1967.

Taylor Johnson

http://syvnews.com/news/data/the-cost-of-a-cup-of-coffee-then-and-now/article_687b8cce-61f6-54cc-b897-547d603e95d0.html

 

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India 16/17 crop expected 8% lower due to weather

KOCHI:

India  coffee production is likely to decline by eight per cent in the current fiscal mainly due to lack of timely rains, the government said on Monday.

“It has been estimated that there is a likelihood of decline in coffee production in 2016-17 by 8 per cent compared to that in 2015-16 due to lack of timely rains and high temperature during the crucial flowering stage,” Commerce and Industry Minister Nirmala Sitharaman said in the Lok Sabha.

Sitharaman said of the total coffee growing areas in the world, only 2 per cent are in India but they produce 4 per cent of the world’s total coffee production and 90 per cent of Indian coffee is exported.

United Planters’ Association of Southern India (UPASI) commodities’ head Sanjit R Nair said that due to high temperature, coffee production would decrease in 2016-17. “There will be an impact on domestic prices. At present 70 per cent of coffee produced in India is being exported. The price of coffee is largely determined by domestic factors,” he added.

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Market Commentary July 26

Prices were lower on what appeared to be long liquidation tied to reports of better weather in Brazil. The weather in Brazil turned warmer again and harvest conditions have improved.

Trends have turned down on the daily charts.  Trends in New York are mixed to down with objectives of 136.00 and 126.00 September. Support is at 138.00, 135.00, and 133.00 September, and resistance is at 145.00, 147.00 and 151.00 September.

It has been a supply driven rally as ideas are that offers from producing countries are lower due to reduced inventories in producing countries. Price action still suggests that the production in Brazil and in all Arabica production countries is down. However, there has not been anything new to push prices higher, so speculators will keep liquidating until something new does appear.

There are also reports of reduced supplies now in Vietnam and Indonesia, although the London market is turning short term trends down as well. There are concerns expressed about Colombian production from highly variable weather this year. Rains are good in Mexico and Central America, and good production is expected this Winter.

Overnight News:

  • Certified stocks are higher today and are about 1.300 million bags.
  • The ICO composite price is now 129.40 ct/lb.
  • Brazil will get dry conditions. Temperatures will average near to above normal.
  • Colombia should get scattered to isolated showers.
  • Central America and southern Mexico should get mostly dry conditions. Temperatures should average near to above normal.

 

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Vietnam Prices

Vietnam’s coffee prices hit 12-month high
Jul 19,2016
HANOI, July 19 (Xinhua) — The coffee price in Vietnam’s Central Highlands Dak Lak province at one time reached 38.9 million Vietnamese dong (1,729 U.S. dollars) per ton during the week, the highest since June 29, 2015, according to the Ministry of Agriculture and Rural Development (MARD) on Tuesday.

Compared to the previous week, the prices of green Robusta coffee beans in Vietnam’s Central Highlands provinces have risen to 37.6-38.3 million Vietnamese dong (1,671-1,702 U.S. dollars) per ton, up 600,000 Vietnamese dong (26.7 U.S. dollars) each ton, Vietnam’s state-run news agency VNA quoted the MARD as saying.

Meanwhile, the freight on board (FOB) price of Robusta coffee gained 24 U.S. dollars per ton to reach 1,756 U.S. dollars per ton.

The rising trend was attributed to the global price hike in the previous week due to concerns over the prolonged drought’s impact on coffee harvest in Vietnam and India, two among the world’s top Robusta coffee producers.

According to the ministry, coffee exports of Vietnam, the world’s largest Robusta coffee exporter, reached an estimated 1.32 million tons in the first nine months of the 2015-2016 crop year, up 32 percent compared to a year earlier.

Meanwhile, in the first half of 2016, the country earned 1.71 billion U.S. dollars from exporting 985,000 tons of coffee, up 17.6 percent in value and 39.8 percent in volume year-on-year.

During five-month period, Germany and the United States continued to be top consumers of Vietnamese coffee, with respective market shares of 15.85 percent and 12.89 percent.

Vietnam witnessed strong growth in coffee exports to China (up 54.63 percent year-on-year), Russia (48.73 percent), the U.S. (30.59 percent) and Germany (17.59 percent), said the ministry.

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Rwanda and Mexico are the first countries to join the Sustainable Coffee Challenge

by Gina-Marie Cheeseman on Tuesday, Jun 21st, 2016

Nearly 9,000 miles apart, Rwanda and Mexico are the first countries to join the Sustainable Coffee Challenge — which aims to increase the demand for sustainable coffee. Representatives from both countries joined with Conservation International (CI) at European Development Days to announce their partnership in the challenge.

CI launched the challenge back in December at the U.N. climate negotiations in Paris. It was intended as a call-to-action for the sector to make coffee the world’s first entirely sustainable agricultural product. Starbucks came aboard as the first partner. A total of 18 partners signed on by the time the challenge launched at COP21. The number is now up to 48, including the Specialty Coffee Association of America (SCAA), Ceres, Fairtrade America and Keurig Green Mountain.

The challenge brings partners together from the coffee industry, conservation, agricultural development and governments to increase the demand for sustainable coffee. While almost half of the global coffee supply is produced according to a sustainability standard, only 12 percent is sold in the market as sustainable coffee. The partners will create commitments for the various parts of the coffee sector.

Rwanda’s commitments include efforts to increase the production and yield per coffee tree, improve soil fertility, strengthen farmer organizations, and improve traceability in the value chain. Mexico’s commitments include improving farm productivity and providing access to credit programs.

There are three main ways that participants are encouraged to contribute:

Commit to publicly stating and reporting their goals.
Join a working group to help shape the challenge.
Participate in commitment networks with other participants to share experience and encourage additional action.
Coffee in Rwanda is a “critically important commercial crop,” said Ambassador Bill Kayonga, CEO of Rwanda’s National Agricultural Export Development Board (NAEB), in a statement. There are over 355,000 smallholder farm families in Rwanda that depend on coffee to make a living. “We have an obligation to these farmers, their lands and the economy of our country to ensure the continued sustainability of the industry,” Kayona said.

Coffee is also an import crop in Mexico, with an estimated production of 2.35 million bags of coffee a year. As in Rwanda, most of the coffee is grown by smallholder farmers, almost 500,000. And like Rwandan coffee farmers, Mexican coffee farmers depend on coffee production to make a living. “We believe that by publicly stating our commitment to work with our farmers to ensure sustainable practices that increase productivity and enhance their livelihood, while also minimizing the impact on the ecosystem, we can help set an example of how to elevate positive outcomes across all coffee producing regions,” said Santiago Arguello, director of coordination for Mexico’s Integrated Plan for the Care of Coffee.

Making coffee the first sustainable agricultural product is a lofty goal, but it is one that is badly needed as coffee production is already feeling the effects of climate change. Consumer demand for coffee increases, with 600 billion cups being consumed annually, and the coffee industry is a $22 billion business. However, the coffee industry is being affected by changing weather patterns, warming temperatures and drought. Warming temperatures have increased the coffee berry borer, which grazes on coffee plants. The fungus called coffee rust thrives in warmer temperatures and can devastate coffee crops. Three of the top 15 coffee-producing nations in the world (Costa Rica, India and Ethiopia) have all seen a great decline in yields.

The coffee industry can help combat climate change by encouraging sustainable farming practices. This could provide over 30 percent of the carbon sequestration and storage needed to keep global temperature rise to a safe level, according to CI. And the challenge has the potential to be a catalyst for the coffee industry to help reduce the world’s carbon emissions.

http://www.triplepundit.com/2016/06/rwanda-and-mexico-are-the-first-countries-to-join-the-sustainable-coffee-challenge/

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Record arabica crop, low ending stocks, exports expected to remain unchanged

Record arabica crop to lift Brazilian coffee output
Brazilian coffee production will soar by 13% this year, but remain short of all-time highs, with a drop in the drought-hit robusta crop offsetting a rise in arabica output to a record top.

In its first estimate for the 2016-17 crop, the US Department of Agriculture’s Brasilia bureau pegged it at 55.95m bags.

That would represent an increase of more than 6.5m bags year on year, but fall short of the record 57.6m-bag harvest reaped four years ago.

This increase is forecast being led by arabica beans, for which the bureau forecast output soaring from 36.10m bags last year to 43.85m bags – eclipsing the highs of 42.1m bags set in 2012.

Arabica yields are expected to increase due to “good blossoming between September and November 2015 in all producing regions and overall good weather conditions during fruit setting and development”, the bureau said in a report.

Indeed, there is potential for further upgrades yet to the arabica top, “due to expected above-average de-husking yields and quality of the beans” expected to emerge as harvest progresses, with beans expected to be of larger average size.

‘Prolonged dry spells’

However, robusta output was projected to fall by 9% from 13.30m bags in 2015-16 to 12.10m bags this time – a seven-year low on USDA estimates.

The bureau pointed to “above-average temperatures and prolonged dry spells in Espirito Santo,” Brazil’s top robusta-producing state, that will “again jeopardize production potential.

“In addition, water shortages remain an issue for the state, thus limiting the use of irrigation on coffee plantations.”

Market expectations

Other estimates released through the week also point to a bumper coffee crop in Brazil. Marex Spectron, the UK-based brokerage firm, forecast a 2016-17 crop of 56.6m bags, up 13% year on year.

Safras e Mercado, the Brazilian crop forecasting firm, expects output of 56.4m bags, up 12% year on year, due to “more favourable rains earlier in the season”.

Nonetheless, the USDA bureau forecast a pullback in Brazilian coffee exports in 2016-17, on a July-to-June basis, despite the higher production, a reflection of the depletion of stocks thanks to the knock-on effects of disappointing output and strong shipments over the past two years.

At 35.2m bags, exports next season will fall “slightly” on the 2015-16 estimate of 36.0m bags “due to expected lower [carry-in] stocks”.

Higher costs

The recent drawdown in Brazilian stocks – which the bureau estimates will end this season at 2.26m bags, the lowest figure but one on data going back to 1960 – has been encouraged by weakness in the real, which makes the country’s exports that much more competitive.

However, the depreciation has helped swell production costs “significantly” too, encouraging inflation and boosting the price of imported goods.

Producer costs in Minas Gerais, the largest producing region in Brazil, rose by 34% year on year for the last harvest.

In particular, costs were pushed higher for key inputs of machinery (up 205%), labour (up 67%) and fertilizers (up 23%).

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