May 30 2019
The commodities press reported yesterday that the latest forecast for the new Brazil crop from the well-respected brokers and consultants Intl. F C Stone has foreseen this crop to be approximately 15.9% lower than the previous crop, at a total of 53 million bags. This to be made up from 36.9 million bags of arabica coffees and 16.1 million bags of conilon robusta coffees.
This forecast from Intl. F C Stone is significantly lower by approximately 5 million bags than many other forecasts from Brazilian and International brokers, analysts and trade houses, but it is a report from a respected body and assists to buoy sentiment within the market. Sentiment that has been buoyed over the past few days, by the early cold front that was encountered in South East Brazil, which was a reminder that along with a smaller crop this year, there always remains a frost threat to damage the potential of the follow on 2020 crop. While there was further support for sentiment yesterday, which came with the firming of the Brazil Real.
It has been twenty-five years since the main coffee producing districts within South East Brazil have encountered any significant damaging frost event, but world weather is erratic and one cannot completely discount the possibility of frost. Many within the industry and the speculative sectors of coffee market, shall never have encountered the market reaction to a frost event but all will know of its historical influence upon the market, which is likely to bring with it some degree of cold front volatility for the markets, through to the end of July.
There have been reports of some quality concerns emanating from Brazil, in terms of the overall quality of the new crop that has started to be harvested. This related to the fact that many farms experienced multiple flowering last year, which will relate to a lack of uniformity of ripening and with the Brazil strip harvesting that is related to relatively high cost of harvesting, a higher percentage of under and over ripe cherries included with the harvest.
One would speculate though that with a 21 million bags domestic market to absorb most of the lower quality coffees, that this should not really impact upon the availability of quality coffees for the consumer markets. These new crop arabica coffees due to be supplemented by some volumes of quality carry over Brazil arabica coffee stocks, from last year’s bumper crop.
Today is the Ascension Day public holiday for many leading European countries, but does not impact upon the USA and UK and the coffee markets. It is likely though in terms of physical trade and the significant consumer market share of the Western Europeans, to somewhat mute business for the day.