Head of exporters group Cecafe sees ‘plenty of stocks’
Biggest problem remains logistic bottlenecks, Rueda says
By Tatiana Freitas
The world’s top coffee producer has enough stockpiles to ensure java lovers their daily cups despite recent droughts, though shipping the commodity remains a challenge, the head of Brazil’s exporters group said.
“This is not a moment of high stockpiles, but they are enough to meet demand from local and global industries,” Nicolas Rueda, president of the Cecafe exporters association, said in an interview. After a bumper crop in 2020, “it was possible to pile up plenty of stocks.”
Rueda’s comments offer some insight into a market with no transparent, up-to-date data on how much of the arabica coffee favored by Starbucks Corp. Brazilian growers have in store, with stockpiles monitored by the ICE Futures U.S. exchange at the lowest level in 22 years.
Concerns over the state of Brazil’s crop after two years of dry weather and a pandemic-driven supply chain crisis have sent arabica futures in New York to their highest in a decade. Like so many other commodities, surging coffee prices are contributing to a higher cost of living around the world.
While stockpiles monitored by ICE are an important indicator for the supply and demand balance, they represent just 1 million 60-kilogram (132-pound) bags of coffee out of 30 million estimated by the U.S. Department of Agriculture for global inventories.
The latest figure from Brazil’s crop agency Conab dates back to March 2020, estimating 13 million bags in storage, but a lot has happened since. So how much coffee exactly is in Brazilian warehouses is a mystery.
But for Rueda, the biggest issue remains getting supplies shipped, not whether there’s enough to meet demand. In addition to the lack of containers that curbed Brazil’s coffee exports last year, inland transportation has also been a problem in top destinations such as the U.S., where there’s a shortage of truck drivers.
“The whole logistic process is unbalanced and it will take a long time for it to fully recover,” said Rueda, who is also South and North America director at Volcafe, one of the world’s largest coffee-trading firms.
Brazil exported 2.8 million bags of coffee in January, down 10% from a year earlier, and the expectation is that volumes will keep trending lower for the next few months, according to HedgePoint Global Markets.
In January, sea transportation snarls improved with more ships available, but containers remained scarce, Rueda said.
Because of that, exporters have increasingly resorted to shipping their coffee in large bags stacked in the hold of break-bulk vessels like in the past, before the era of container logistics. Last year, five of these cargoes departed from Brazilian ports and there were probably more last month, Rueda said.
“This shipping modality is here to stay,” Rueda said.
Two consecutive poor crops in the South American country will probably keep stockpiles near the lowest level in decades, according to data from the U.S. Department of Agriculture. That would leave little room for the country to weather further crop issues. Any potential frost during the southern hemisphere winter, between June and August, could worsen the tight supply prospects.
So far, the outlook for arabica crops has improved, with rainy weather allowing coffee trees to recover, according to Rueda.
While the benefits from recent showers will be more pronounced in the 2023-24 season, they also favor the current crop by allaying the impact of recent droughts and frosts, as the so-called cherries that contain the coffee beans start to form. In addition, robusta growers are expected to deliver a record harvest.
“That would be enough to quench the market’s thirst,” Rueda said.