In 1996/97 opening coffee stocks were 33 mln bags and world consumption was 108 mln bags a 30.5% stock to use ratio.
Today to be equivalent , it would mean 52 mln bags of coffee in storage. I wonít get into the details of todays stock number but it is low and projected to get lower.
In 97/98 no one was taking coffee from the exchange as they are today for legitimate consumption. Speculators saw an opportunity and jumped on it creating a formidable short squeeze. Of course once the squeeze was alleviated prices fell because there was plenty of coffee. Delivery at that time was only in US warehouses so you had to get the right coffee in the right place by the right time.
Colombia, Guatemala, Mexico,Honduras , Nicaragua, Costa Rica, El Salvador in 96 produced 30 mln bags, in 1997-28 mln bags, today they still only produce 30 mln bags. These are the coffee origins that usually find their way to the exchange. These origins have their dedicated customers the exchange is a last resort sale.IMO this makes for a very bullish situation. You have a huge increase in demand over the years yet the Arabica supply has grown mainly in Brazil and Brazil has just had 2 back to back crop failures plus their coffee for all intents and purposes this year is not deliverable.
Iím fully aware robusta production has grown, no one knows exact stock figures, no one knows consumption , yada yada, weíre not scientists and even if we were we canít come to an exact figure. Our job is to weigh the knowns and unknowns. My take is they are right now decidedly bullish!