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Reflections and a reasoning of logic
Posted by CafeicultorBrasileir
on December 6, 2020, 10:13 am
I'll do it in a logical exercise: Brazil harvested in the year 2018 and in the year 2019, two harvests giving a sum of "Y" bags. Without the climatic problem, the sum of the harvest of 2020 and 2021 would be similar to "Y", since there was no increase in the area under production or technological advances in this period of time. It happened that from April to mid-November 2020 there was a super drought with extremely high temperatures, which will result in the loss "L" of production in arabica coffees. So the 2020 + 2021 harvest will be equal to "Y-L", "Y" minus the loss "L". It happens that the biennial production of 2018 plus 2019 was fair for world consumption, Brazil exported a lot of coffee in these two mentioned crops and there was no surplus stock in Brazil, in April 2020 new coffees were used, freshly harvested for export and consumption internal market, see use of robusta Brazilian coffees. So, if other countries do not increase their production to make up for this loss of production in Brazil, this is the "L", this will be the world deficit. Analyzing other countries such as Vietnan, Colombia, Honduras, Indonesia, India etc., there is no country with this capacity to produce and export more coffee, quite the contrary, the news we know is that due to hurricanes and excessive rainfall, these other coffee producing countries will remain stable or falling. So we have to see how the stocks are in importing countries, what are the quantities and availability. Part of these stocks are hedged in the futures markets, for their use there must be repurchases in the futures market. We also have to analyze whether the holders of these stocks are willing to dispose of them at the current market value. See that I tried not to use numbers and values, just a logical reasoning. Now it is time to discover how much Brazil's losses are for the 2021 harvest, and, according to what has been reported by producers and large cooperatives, the losses are enormous, there are extreme cases of 100% losses and there are many. Regarding the lowest world consumption, consumption came from a growth of almost 2% per year, what will be the real decrease in consumption ?? Could it be that in homes there is not a growth in consumption of cups much greater than outside the home ?? For this reason I advise you to check the attention to the severity of the loss of coffee production in Brazil, so you can make your trades more safely.