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World coffee stocks to hit 4-year low, despite output rise

World coffee production will rise in 2015-16, helped by record harvests in Honduras and Indonesia – but not gain enough to prevent world inventories falling to their lowest in four years.

Global coffee output next season will rise by 6.4m bags to 152.65m bags, rising for the first time in three seasons, the US Department of Agriculture said.

The estimate for a production rise is "due primarily to record output in Indonesia and Honduras, the USDA said, citing "favourable weather during the flowering and fruit set period" for expectations of a 2.2m-bag rise to 11.0m bags in output in the South East Asian country.

For Honduras, a rise in output by 700,000 bags to 5.9m bags will be fuelled by the maturation of rust-resistant trees planted amid a campaign to counter the devastating fungal disease.

Brazil, Vietnam estimates

The USDA also forecast a rise in of 1.2m bags to 52.4m bags in output in Brazil, the top coffee producing country, where plantations are recovery from severe drought last year.

The Brazilian arabica crop was seen rebounding by 3.8m bags to 38.0m bags, thanks to "favourable weather during most of the growing period", although the USDA did acknowledge that "January was drier than average in Minas Gerais and Sao Paulo, two regions that account for about 80% of [domestic arabica] output".

The Brazilian robusta coffee harvest was pegged at 14.4m bags, a drop of 2.6m bags, "following below-average rainfall and above-average temperatures in Espirito Santo," where most of the country's robusta crop is grown.

Output in Vietnam, the second-ranked coffee-growing country, mainly of robusta, was pegged at 28.6m bags, a rise of 400,000 bags year on year, "as yields improve on favourable weather".

Although early 2015 had seen a dry period in Vietnam's key Central Highlands region, trees were irrigated, and the dry season "began as anticipated… which lead to good flowering and cherry development".

Stocks to fall

Nonetheless, with world coffee exports and consumption "forecast at record quantities", global stocks will fall for a second successive season over 2015-16, this time by 2.01m bags to 31.54m bags.

That would be the lowest in four years, including a 1.47m-bag drop to 4.29m bags in inventories in Brazil, for which exports are seen remaining relatively high compared with output.

Vietnam's inventories were, at 4.47m bags, seen remaining "elevated", although down 410,000 bags year on year.

The stocks-to-use ratio, a key measure of a commodity's availability and therefore of its pricing potential, will fall to a four-year low of 21.6%, from 22.7% at the end of 2014-15, and 27.8% the year before.

'Strong US and European demand'

The USDA data also included a downgrade of nearly 3.0m bags to 33.55m bags in the estimate for world coffee inventories at the close of 2014-15, reflecting downgrades to production estimates for Central America, Mexico and Peru, thanks to rust, and to Vietnam's harvest too.

The estimate for Brazilian inventories was cut by 1.2m bags to 5.8m bags, thanks in part to surprisingly strong exports, for which the estimate for 2014-15 was lifted by 2.5m bags to 32.5m bags "on strong US and European demand".

--Adapted from http://www.agrimoney.com/--


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