Supplies will fall short of demand by a record 12 million bags
Dry weather and frost have hurt the crop in top grower BrazilBy Isis Almeida
(Bloomberg) -- The world’s coffee shortage will be even bigger than previously expected as extreme weather and shipping delays upend the global market, according to Swiss trader Volcafe Ltd.
The deficit will be 3.4% deeper than the last forecast, at almost 12 million bags for the 2021-22 season that starts in October in most countries, the coffee unit of commodities trader ED&F Man Holdings Ltd., said in a report seen by Bloomberg. That’s an all-time high and reverses a surplus the previous year.
Coffee prices have surged 49% this year as dry weather hurt output in Brazil, the world’s largest producer, while frost is curbing potential for next year’s harvest. On top of that, the coronavirus has hit supply chains, leaving some of the world’s biggest coffee-consuming regions relying on stockpiles.
“A tragic rise in global Covid-19 cases driven by the delta variant has further upended container shipping,” Volcafe said. “This, together with extreme weather across Brazil’s arabica regions, added to the record global coffee deficit, has culminated in futures prices reaching multiyear highs.”
Arabica output in Brazil -- already expected to decline as trees enter the lower-yielding half of a two-year cycle -- will be 30.9 million bags due to dry weather, Volcafe forecasts. That’s 2.1 million bags lower than a previous forecast and the smallest crop in 14 years. A bag of coffee weighs 60 kilograms, or 132 pounds.
The dry weather has also curbed the potential of next year’s output by almost 5 million bags, while frost damaged another 4 million bags, the trader said. All of that leaves Brazil with a potential arabica crop of 45 million bags for next year.
Coffee demand is expected to rise 1.5% in the season that starts in October, below the long-term average of 2.4%, according to the report. Still, stockpiles will be drawn down in consuming countries due to the container crisis.
“The worsening container shipping situation is challenging supply chains across key coffee trade routes, resulting in a faster draw in destination stocks,” Volcafe said.
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