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ICO flags 'strong demand' for coffee, as importers' volumes grow

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The International Coffee Organization flagged “strong” demand for coffee, as it reported decent growth in importers’ buy-ins – being fed largely by increased shipments from Brazil.

 

“Demand for coffee appears to be strong,” the intergovernmental group said, citing imports by its member countries plus the US, which together account for 75% of buy-ins, which “increased by 4.9% to 66.56m bags in the first six months of coffee year 2018-19”, which began in October.

 

Among major buyers, imports by Japan were particularly strong, soaring 13.5% to 3.92m bags over the period, with US ones up 8.1% to 14.98m bags.

 

European Union imports grew by 3.5% to 42.71m bags.

 

And the ICO highlighted the strong showing by Brazil in these shipments, with EU purchases from the South American country up 12.5% at 8.92m bags, to account for 21% of overall volumes.

 

Japan’s imports from Brazil rose by 36% year on year to 1.52m bags, with the US’s purchases from this origin up 25% at 4.33m bags.

 

Rising exports

Brazilian coffee exports meanwhile, recorded particularly strong growth in May, more than doubling to 3.52m bags, although the extent of the expansion reflected comparison with a May 2018 figure which was depressed by a dent to trade from a truckers’ strike.

 

Even so, the result was well ahead of the typical May figure, with the ICO reporting an average of 2.73m bags for the month from 2013-17.

 

For the October-to-May period, the first eight months of 2018-19, Brazilian shipments grew by 33% to 27.78m bags, by far the strongest growth of any major exporting country.

 

Overall global exports rose by 7.5% over the period to 86.57m bags.

 

Price differentials

Brazil’s strong export performance reflects its record 2019 coffee harvest, broadly pegged at 60m bags, and with some estimates as high as 65m bags.

 

The gains have also been spurred by competitive prices of Brazilian natural arabica beans, with their premium over robusta values, for instance, plunging by 40% year on year to just 18.85 cents a pound in March, according to ICO price composites.

 

However, that competitiveness was eroded last month, when Brazilian natural values soared by 9.5%, leading 7.1% growth in coffee values overall, on ICO data.

 

Their premium over robusta beans rebounded to 26.67 cents a pound.

 

‘Low temperatures are due’

Brazilian prices have been boosted by ideas that the ongoing arabica harvest may prove short of investor expectations, with concerns too that upbeat hopes for 2020 may be misplaced, with concerns over cold weather.

 

I&M Smith noted that Brazilian national weather service Inmet “issued a forecast overnight to confirm that low temperatures are due to come to Minas Gerais and Sao Paulo as the weekend approaches.

 

“The forecasts are for overnight temperatures to touch between 4-6 Celsius and the likelihood of frost is mentioned in the report.

 

“However the report goes on to say that stronger occurrences are expected in mountainous regions away from the coffee growing areas.”

 

‘Big question mark’

Separately, Silas Brasileiro, president of Brazil’s Conselho Nacional do Café (CNC) producers’ group, said that heavy rains in May could have an impact on the 2020 crop, which will be harvested from vegetation grown this year.

 

“We’ve never had so much rain in May, that’s a big question mark,” Mr Brasileiro told Dow Jones.

 

He also cited the dent to good husbandry from recent low price, saying that plantations “were not well taken care of, because the farmers do not have the resources for this," he said.

 

“If you look at Central America, Colombia, Africa - it’s the same situation everywhere.”

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