Brazilian Coffee: Brazil's Coffee Production Rank and the Recent Production Decline Leading to Price Increases
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Brazil's Coffee Export Decline Amid Supply Chain Challenges
Brazil, the world's largest coffee-producing country, has experienced a downward trend in coffee exports.
According to data from the Brazilian Coffee Exporters Association (Cecafe), Brazil's coffee exports in May amounted to 2.6 million bags (60kg per bag), a 20.3% decrease year-on-year.
Exports of Arabica coffee beans, favored by specialty coffee shops and premium brands, fell by 16% to 2.05 million bags; while Robusta coffee beans, widely used for instant coffee production, decreased by 40.9% to 287,627 bags compared to the same period last year.
Cecafe also reported that exports of coffee powder, roasted coffee beans, and instant coffee decreased by 18.5% to 275,111 bags.
Major Factors Behind Export Decline
Two main factors contributed to the decline in May's coffee exports: ① Container shortages; ② Limited vessel space.
Currently, a large number of containers worldwide are stranded in Asia and the United States, creating a global shortage of available containers.
A new outbreak of COVID-19 in southern China has suppressed commercial activities, forcing business slowdowns. Ports and terminals in southern China have experienced delays, congestion, and container supply shortages. Some vessels have been delayed outside ports for up to a month due to congestion, incurring huge demurrage fees.
The Wall Street Journal reported in May 2021 that as the U.S. economy began to recover from last year's COVID-19 pandemic, consumer demand started to improve, and enterprises began large-scale inventory replenishment, causing global shipping delays and restricting vessel transport capacity, further exacerbating the shortage of sea containers needed for cargo transport.
Brazil's 21/22 Production Forecast
According to data provided by the local Brazilian industry consultancy Safras & Mercado, due to drought issues in the first few months of 2021, Brazil's estimated production for the 21/22 season is 56.5 million bags, an 18.8% decrease from the previous season's 69.6 million bags.
Overall, the 21/22 season faces severe supply constraints. Even the recovery of ending stocks from the 20/21 season failed to mitigate the impact of Brazil's 2021 crop reduction. In some sense, we expect export potential to decline by 18% to 38 million bags (green beans + instant + coffee powder). Ending stocks for the 21/22 season are estimated at 2.48 million bags.
Brazil Coffee Supply and Demand Balance Sheet: 21/22 Season
| 20/21 Season | 21/22 Season | Change | |
|---|---|---|---|
| Beginning Stocks | 4.28 million bags | 5.83 million bags | +36.2% |
| Production | 69.6 million bags | 56.5 million bags | -18.8% |
| Total Supply | 73.88 million bags | 62.33 million bags | -15.6% |
| Domestic Demand | 21.2 million bags | 21.5 million bags | +1.4% |
| Exports | 46.85 million bags | 38.35 million bags | -18.1% |
| Total Demand | 68.05 million bags | 59.85 million bags | -12.0% |
| Ending Stocks | 5.83 million bags | 2.48 million bags | -51.3% |
Based on the above data, it's not difficult to explain why coffee prices have been rising recently. As of the market close on June 11, the spot price of Brazilian coffee reached 900 Brazilian reais per 60kg.
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