Exports to leave Brazil with 'not much' coffee

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 levels.

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.

Deficit mathematics

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 green coffee.

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 industry.

'Not be much of inventories left'

"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.

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