Coffee investors should not be deceived by strong Brazilian exports
into thinking that downbeat harvest forecasts in the top producing country are
overplayed, a leading commentator said, warning stocks will be run down to low
Carlos Brando, a consultant on coffee to the International
Coffee Organization and the World Bank, said that strong Brazilian coffee
exports, coupled with a good pace of early harvest, had created a "false
impression" of a crop which was not as bad as some observers had suggested.
Data last week from Brazilian shippers group Cecafe showed
green coffee exports at 2.66m bags last month, up 37% year on year.
Brazil's green coffee exports for the first seven months, at
18.52m bags, are 21% higher than a year before, on Cecafe estimates.
However, the arabica harvest had "finished much earlier than
usual", underscoring ideas of a weak crop.
Indeed, it would be far too small to support on its own Brazilian
exports which Cecafe has forecast, including soluble coffee, at 32m-33m bags in
2014 - up from 31.2m bags last year, a figure which included 27.8m bags of
Separately, the state trade centre for Minas Gerais, Brazil's
top coffee growing state, forecast Brazil's overall coffee shipments at 34m-35m
bags this year.
Mr Brando said that, assuming the average forecast of about 45m
bags for Brazil's coffee harvest, domestic consumption of 21m bags left only
some 24m bags to cover the needs of bean exports and the soluble coffee
'Not be much of
"The high volume of Brazilian exports in 2014 and a possible
record figure for the full year should not deceive market analysts," said Mr
Brando, director at Brazilian consulting group P&A Marketing.
"These high exports are being supported by inventories that
are being drained down and will not be replenished by the current crop.
"There will not be much of inventories left," he said,
adding that the "deficit is much more critical if one analyses arabica alone
which is where the [production] losses indeed are".
Separately, the Minas Gerais state trade centre also cautioned
over a run-down in Brazilian coffee inventories.