The global coffee market is expected to experience a larger deficit in the 2021/22 season than initially projected, as output in main supplier Brazil is seen smaller due to below-average rains, according to a newly-released report.
Dutch bank Rabobank, which has a strong footprint in the agricultural sector, has said that it now projects a global balance supply deficit of 2.6 million 60-kg bags in 2021/22 compared with 1.1 million bags seen in December.
"We trim our 2021/22 production number by just over 2 million bags - 1.2 million bags of this drop comes from a downward adjustment in Brazil," the bank said in the report produced by analysts Carlos Mera and James Watson.
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Rabobank now expects the new Brazilian crop at 56.2 million bags versus 57.4 million bags seen in December. The bank also reduced the expected crop out of Colombia, which is a producer of fine mild arabicas, by 300,000 bags to 14.1 million bags.
The deficit is not larger because the bank reduced its view for total demand by half a million bags.
"Net imports in non-producing countries continued to come in weak in Q4 2020," the bank said, citing a 1.9% drop in what it calls "coffee disappearance" in Europe plus UK and a 9.5% drop in Japan.
Also, there is a large carryover volume from the previous season as the surplus in 2020/21 is seen at 10.5 million bags.
Arabica Coffee Prices
Rabobank thinks arabica coffee prices should not stay above $1.30 per pound (in the second contract in the New York futures chain), but said that "factors like speculation, shipping costs, and increased demand for inventories could cause that scenario."
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