Coffee Prices Rising?! Brazilian Coffee Inventory Hits Historic Low

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Brazil's Coffee Inventory Reaches Historic Low Amid Global Supply Crisis

Accompanying the phenomenon of supply and demand imbalance in the global coffee market, the coffee inventory of Brazil, the world's largest coffee-producing country, has reached a historic low point!! Given Brazil's situation, the global coffee supply tension may continue to face severe challenges.

Recently, according to reports from Coffee Finance Network, after completing four surveys, CONAB (the National Commodity Supply Corporation under Brazil's Ministry of Agriculture) has determined Brazil's total coffee production for the 2022/23 season to be 50.92 million bags (60 kg per bag), a 6.7% increase year-on-year. However, it is expected that Brazil's coffee inventory at the end of 2021/2022 will be only 540,000 bags, an 88% decrease year-on-year, the lowest level since inventory records began in the 1960s. After the increase in production, Brazil will use part of its coffee to rebuild inventory, so the coffee production volume is not 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 be 36.65 million bags, making this the lowest coffee export volume since the 2017/18 season. In 2021, Brazil experienced extreme weather during the harvest season, including drought and frost, leading to a nearly 20% decrease in production year-on-year, so more was used to replenish inventory.

This year, Brazil's Robusta coffee production increased by 11.7% year-on-year, reaching 18.2 million bags. However, due to continued adverse weather impacts from drought and frost, Brazil's Arabica coffee bean production still failed to reach maximum production. The total production of 32.72 million bags of Arabica is far below the market expectation of 48.7 million bags.

Public data shows that Brazil's total coffee planting area is 2.23 million hectares, while Brazil's largest coffee-producing region—Minas Gerais—saw its coffee production decrease by 0.8% year-on-year to 22 million bags this year, with yield per hectare decreasing by 4.6% to 21.6 bags/hectare.

Brazil's Arabica coffee has always been known for its creamy, nutty, chocolate, and caramel flavors, with a slight bitterness but a fragrant, smooth taste that even first-time coffee drinkers can easily accept. Therefore, this variety has the highest market acceptance, with Brazilian Arabica coffee accounting for about 80% of total production. This year's Arabica production did not meet expected yields, so the supply shortage situation may not be relieved.

As the world's second-largest coffee-producing country—Vietnam—its coffee bean inventory is also rapidly decreasing. According to the median value from media surveys of market traders, by the end of September this year, Vietnam's coffee inventory will have decreased by half compared to the same period last year. Vietnam is the main producing country of Robusta, the coffee variety with the highest global demand.

It appears that the inventory levels of the two major coffee varieties grown worldwide are both decreasing, while coffee demand continues to increase. Additionally, as the global economy gradually recovers from the pandemic, more coffee will be needed in the future. Today's coffee market has already seen the largest supply gap in recent years, with a severe imbalance between supply and demand.

CONAB, the National Commodity Supply Corporation under Brazil's Ministry of Agriculture, points out that the conversion rate of fresh coffee cherries to green coffee beans in Brazil this year is lower than the average in previous years, which may also be one of the main reasons for the market supply shortage.

As the largest producer and exporter, Brazil's coffee production accounts for one-third of the world's total production, making it an important core of the global coffee market. Changes in the country's production and supply will directly affect global coffee supply. Supply shortages may continue to worsen and drive international coffee consumption giants to continue raising coffee prices.

Image source: Internet

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