on July 18, 2022, 2:07 pm
With the 21/22 season over we know that exports were about 40 mln bags and domestic consumption at approximately 23 mln bags for total usage of 63 mln bags. I followed the 21/22 crop development Very closely and compared with many analog years I believe that Arabica at 33 mln bags was if anything over estimated. I have very high confidence in this fact! If we add Arabica 33 with Conillon 22 we have total Brazil production of 55 mln bags. The difference between demand at 63 mln bags and supply at 55 mln bags was covered by Brazilian stocks which I estimate were at the start of the year between 8 and 10 mln bags. The Brazil 18/19 was a large Arabica crop and the 20/21 Arabica crop was underestimated by 2-3 mln bags. In addition there was a long period with coffee prices under$1.00 to the producer and those who could stored some coffee awaiting better times. The 14/15 bull market was derailed by producer stocks and producer stocks have kept us in a holding pattern for the last 8 months. But now we start a new season the world market under ideal conditions would like Brazil to supply 45-46 mln bags for export. Domestically Brazil requires 23 mln bags so an ideal crop to keep world coffee in balance would be 68-69 mln bags. Cotillon is going to supply 23 mln bags. That means we need Arabica say 45 mln bags. If you believe as I do that Arabica will fall short of 35 mln bags as many reports coming out of Brazil are confirming we are facing a massive deficit of Arabica! The major difference with the year just completed is that BRAZIL IS OUT OF STOCKS! In addition Colombia and Honduras are both expected to produce below their potential. This is the year for coffee where the rubber meets the road. Big gains can never be attributed solely to knowledge and skill, Luck plays a huge role. I believe that coffee at worst is a $1.90-$2.00 item and I like the odds for an explosive move to the upside!
G.L.
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