Coffee Prices Rising?! Brazilian Coffee Inventory Hits Historic Low

Brazil's Coffee Inventory Hits a Historic Low Amid a Global Supply Crunch

As supply and demand drift further out of balance in the global coffee market, the coffee inventory of Brazil, the world's largest coffee-producing country, has fallen to a historic low. Given Brazil's position, the strain on global coffee supply may keep facing serious challenges.

According to reports from Coffee Finance Network, after completing four surveys, CONAB, the National Commodity Supply Corporation under Brazil's Ministry of Agriculture, put Brazil's total coffee production for the 2022/23 season at 50.92 million bags (60 kg per bag), a 6.7% increase year on year. Even so, Brazil's coffee inventory at the end of the 2021/2022 season is expected to be just 540,000 bags, an 88% drop year on year and the lowest level since inventory records began in the 1960s. With production recovering, Brazil will direct part of its coffee toward rebuilding inventory, so the output is not destined for direct export.

According to the latest report from the U.S. Department of Agriculture, Brazil's coffee exports for the 2022/23 season are expected to reach 36.65 million bags, the lowest export volume since the 2017/18 season. In 2021, Brazil was hit by extreme weather during the harvest, including drought and frost, cutting production by nearly 20% year on year and leaving more of the crop to be set aside for restocking.

This year, Brazil's Robusta coffee production rose 11.7% year on year to 18.2 million bags. Arabica, however, still could not reach its full potential because of the continued drought and frost. Total Arabica production of 32.72 million bags fell far short of the market expectation of 48.7 million bags.

Public data shows that Brazil's total coffee planting area stands at 2.23 million hectares. In Minas Gerais, Brazil's largest coffee-producing region, production fell 0.8% year on year to 22 million bags, while yield per hectare dropped 4.6% to 21.6 bags per hectare.

Brazilian Arabica has long been known for its creamy, nutty, chocolate, and caramel flavors, with a slight bitterness and an aromatic, smooth body that even first-time coffee drinkers find easy to accept. That broad appeal gives the variety the highest market acceptance, and Brazilian Arabica accounts for roughly 80% of the country's total production. This year's Arabica crop failed to meet expectations, so the supply shortage may not ease anytime soon.

Vietnam, the world's second-largest coffee-producing country, is also running down its inventory fast. According to the median of media surveys of market traders, Vietnam's coffee inventory by the end of September will have fallen by half compared with the same period a year earlier. Vietnam is the leading producer of Robusta, the coffee variety in highest global demand.

It appears that inventories of both major coffee varieties grown worldwide are shrinking while demand keeps rising. As the global economy gradually recovers from the pandemic, even more coffee will be required. The coffee market today already shows its largest supply gap in recent years, with a severe imbalance between supply and demand.

CONAB points out that the conversion rate from fresh coffee cherries to green coffee beans in Brazil this year is lower than the average of previous years, which may also be one of the main reasons behind the market shortage.

As the largest producer and exporter, Brazil accounts for one-third of the world's total coffee production, making it a central pillar of the global coffee market. Any change in the country's production and supply will directly affect worldwide supply. Shortages may continue to worsen and push the international coffee giants to keep raising prices.

Image source: Internet

FrontStreet Coffee Recommendation

With supply tight and prices climbing, Brazilian beans remain some of the most balanced and dependable coffees you can buy. FrontStreet's Brazil Cerrado Red Bourbon is a classic single-origin Brazilian lot from the well-known Cerrado region, roasted to a medium level so that creamy peanut, toasted bread, caramel, and hazelnut aromas come forward. It is round and smooth with almost no acidity and only a light touch of bitterness, and it works equally well as pour-over, moka pot, espresso SOE, siphon, or French press.

If you would rather explore a rarer variety, FrontStreet's Brazil Queen's Farm uses the uncommon Yellow Bourbon. Grown in Mogiana on fertile red volcanic soil, it brings a clean fruit character and the sugarcane-like sweetness that few other regions can offer, along with notes of fruit and chocolate.