Sep 15

Coffee Weekly Report - 2023 09 15

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  • Recent data from the EU's coffee market reveals notable trends: despite higher imports, coffee stocks saw a 12.6% decline below the average from January to May. However, June marked a rebound with a 3.7% increase, slightly surpassing seasonality.

  • June's imports recorded a 9% YoY drop, and for the cumulative figure in the 2022-2023 cycle, imports fell by 4.1%, missing estimates by 4.5%.

  • Apparent consumption between October 2022 and June 2023 showed a positive 3% YoY change, exceeding estimates by 2%.

  • It’s important to note, however, that the interest rate policies from the European Central Bank amid economic weakening may show up in forthcoming data releases.

  • This prompts a neutral/bullish sentiment toward the 22/23 cycle, which runs until the end of September, since demand is on a positive path, but with low chances of major upward corrections once final results are released.

Coffee demand in destinations | Part II – European Union

In the European Union's (EU) coffee market, a closer look at the data reveals intriguing trends and factors shaping the industry: At the end of June, coffee stocks in the EU stood at 11.56M bags, showing a significant 12.6% deviation below the average. Surprisingly, there was a month-over-month stock increase of 3.7%, which was slightly higher than the expected seasonal change of 2.1%.

In June, the EU imported 3.74M bags of green coffee, marking a -9% year-over-year difference. Import figures also decreased by 8% compared to the previous month, slightly exceeding the expected seasonal decline of -2%. Despite these fluctuations, the EU remains the world's primary coffee importer.

For the 2022-2023 coffee cycle, cumulative imports until June totaled 34.9M bags, reflecting a year-over-year decrease of -4.1%. However, these figures fall short of the estimated 36.5M bags, resulting in a -4.5% deviation. This variance can be attributed to a demand pace slightly exceeding expectations, leading to a -15% change in stocks, despite a -4% change in imports.

Image 1: Coffee Stocks – European Union (M bags)

Source: European Coffee Federation, hEDGEpoint

Image 2: Coffee Imports – European Union (M bags)

Source: Eurostat, hEDGEpoint

Apparent consumption, consolidated from October 2022 to June 2023, reached 34.5 million bags, indicating a positive 3% year-over-year change. This exceeds the estimated 33.6 million bags by 2%. It's important to note that the apparent consumption metric discounts re-exported coffee, which decreased until April but has since picked up.

Lower overall stocks in the EU may be linked to the increasingly high cost of money, driven by elevated interest rates. The European Central Bank (ECB) has raised interest rates recently, but market sentiment suggests potential future rate cuts as the economy weakens.

In summary, the EU's coffee market presents a nuanced picture. Despite some unexpected fluctuations, demand has outpaced projections, leading to lower stocks. This balancing act is expected to continue until September, with market players closely monitoring economic developments and interest rate policies.

Image 3: Coffee Imports – European Union (M bags)

Source: Eurostat, hEDGEpoint

Image 4: Apparent Consumption – European Union (M bags)

Source: European Coffee Federation, Eurostat, hEDGEpoint

In Summary

In the EU's coffee market, recent data reveals intriguing dynamics. Despite higher imports, coffee stocks declined 12.6% below the average from January to May but rebounded with a 3.7% increase in June, slightly above seasonality.

June's imports dropped by 9% YoY, and for the 2022-2023 cycle, imports fell by 4.1%, missing estimates by 4.5%. Apparent consumption from October 2022 to June 2023 showed a positive 3% YoY change, surpassing estimates by 2%. Higher interest rates and expectations of future rate cuts amid economic weakening can still show up in the upcoming data releases, and therefore, the immediate positive deviation from estimates may be lower once the cycle is complete (at the end of September), which leads to a neutral/bullish sentiment regarding the results.

Weekly Report — Coffee

Written by Natália Gandolphi
[email protected]
Reviewed by Lívea Coda
[email protected]
www.hedgepointglobal.com

Disclaimer

This document has been prepared by hEDGEpoint Global Markets LLC and its affiliates ("HPGM") exclusively for informational and instructional purposes, without the purpose of creating obligations or commitments with third parties, and is not intended to promote an offer, or solicitation of an offer, to sell or buy any securities or investment products. HPGM and its associates expressly disclaim any use of the information contained herein that may result in direct or indirect damage of any kind. If you have any questions that are not resolved in the first instance of contact with the client ([email protected]), please contact our internal ombudsman channel ([email protected]) or 0800-878-8408 (for clients in Brazil only).

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