Thursday, April 1, 2021 02:14 PM
By Isis Almeida
World will face a shortfall of 11.6 million bags next season
Brazil’s arabica coffee output forecast cut to 33 million bags
(Bloomberg) --The world will face a record coffee shortage in the upcoming season as output in top grower Brazil tumbles and pandemic-hit consumption starts to rebound, according to one of the world’s top traders of the commodity.
Supplies will fall short of demand by 11.6 million bags in the 2021-22 season that starts in October in most countries, Volcafe, the Swiss coffee unit of commodities trader ED&F Man Holdings Ltd., said in a report obtained by Bloomberg. That reverses a surplus in the previous season.
The shortage comes just as vaccinations speed up in Europe and the U.S., boosting expectations of a recovery in demand as coffee shops, restaurants and cafeterias start to reopen. Coffee prices, which rallied earlier this year on forecasts for a smaller crop in Brazil, have since declined as a weaker currency in the world’s top producer fueled a surge in exports.
“Cautious optimism returns to the coffee market as Covid-19 vaccination programs advance across more than 170 countries, facilitating the easing of social restrictions and a gradual return to out of home coffee demand in cafes, workplaces, and restaurants,” Volcafe said.
Read more: The World Is Facing a Coffee Deficit in Supply Chain ‘Nightmare’
The deficit forecast reverses a surplus of 8 million bags for the current year. Output in Brazil, already expected to decline due to dry weather and as arabica trees enter the lower-yielding half of a two-year cycle, will be 1.1 million bags lower than previously expected at 33 million bags, according to the report.
Global coffee demand, which was hit by the pandemic, will return to growth of about 1% a year by the third quarter, the trader forecasts. That’s still below the 5-year average of 2.6%. Volcafe forecasts are on a crop-year basis, which begins when harvests start in each of the countries.
Still, strong shipments from the Brazil’s last harvest are likely to rebuild stockpiles in consuming nations. That’s even as those beans account for a record share of roasters’ use. The trader expects exports from the South American nation to slow from this month.
While the spread of the coronavirus hasn’t yet disrupted harvests, there’s a risk for countries like Brazil and Peru as infections rise in rural areas, the trader said.
“The recent rise in infections is within the interior regions and local government measures to control the spread of Covid-19 could slow down harvesting operations with labor mobility and internal logistics impacted.”
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