Oct 6

Coffee Weekly Report - 2023 10 06

  Back to main blog page
  • Japan's coffee stocks rebounded to 2.5M bags in August, up 2.3% MoM but still below roasters' typical levels, averaging 19-20 weeks compared to the usual 23-24 weeks.

  • Despite a 23% YoY decline in imports from October to June, the gap narrowed, with the July figure down 19% compared to the same window in the 21/22 cycle.

  • South Korea experienced increased imports (2.38M bags) surpassing last year's figures. The profile of coffee imports shifted, with a notable recovery in the share of arabica origins, reaching 43% in July.

  • The discrepancy in imports and rising stocks in Japan suggests a slight bearish tone, with apparent consumption around 5% below expected levels. South Korea, however, shows a more positive trend with growing imports and a changing coffee origin profile.

Asian Coffee Markets: Trends and Contrasts

This week, we saw the release of coffee inventory figures for Japan, and in this report, we will take a look at indicators from two main Asian coffee destinations, Japan and South Korea.

In the last report about the Asian market, we highlighted that stocks were slowly rebuilding after a significant drawdown driven by lower imports. The trend has continued into August, reaching 2.5M bags (+2.3% month-over-month, vs. the +0.3% expected for August, Chart #1) - but still well below the usual roasters' stock levels expected for the country (on average, for the period, Japan works with 23-24 weeks worth of stocks, and the current metric is at 19-20 weeks).

Looking at imports to derive the apparent consumption marker, the difference in the cumulative figures when compared to the last cycle has shortened: from October to June, imports were 23% lower year-over-year, and 19% below the estimates for the period.
For the October-July period, imports are 19% below 21/22 (4.76M bags vs. 5.90M), and 16% below the estimated figures for the period (5.72M bags, Chart #2).

Image 1: Coffee Stocks – Japan (‘000 bags)

Source: Japan Coffee Association

Image 2: Coffee Imports – Japan (M bags)

Source: Japan Coffee Association

Still, despite a closer metric in terms of imports in July when compared to June, it doesn't explain by itself the stock increase, and apparent consumption remains roughly 5% below what would be expected for the period (5.22M bags vs. 5.50M bags) and also 5.4% below the same window in the 21/22 cycle (Chart #3). Therefore, despite an improvement in inputs, the output remains with a slight bearish tone.

Now, it's important to make a distinction: imports are not behaving exactly the same across Asian countries. In South Korea, imports from October to July are at 2.38M bags, above the same period last year, and in line to meet the just over 3M bags expected for the current cycle.

Also, the profile of coffee imported by the country has changed when compared to the beginning of the year. In the first quarter, South Korea imported on average 36% of its volume from primarily arabica origins. The metric was mostly unchanged for the second quarter, at 37%. Still, into the third quarter, the first figure already shows a substantial recovery: 43% in July - the historical average stands at roughly 40%, and has decreased over time (50% in 2008, vs. 25% in 2022).

Image 3: Apparent Coffee Consumption – Japan (M bags)

Source: hEDGEpoint

Image 4: Coffee Imports – South Korea (M bags)

Source: Trade Map 

In Summary

This week's focus is on coffee inventory in key Asian destinations, Japan and South Korea. Japan's stocks rebounded to 2.5M bags in August, up 2.3% MoM but still below the typical roasters' stock levels. Despite a 23% YoY decline in imports from October to June, the gap narrowed, with the July figure down 19% compared to the same window in the 21/22 cycle.

South Korea, in contrast, saw increased imports (2.38M bags) surpassing last year. Interestingly, the profile of coffee imports shifted, with a notable recovery in the share of arabica origins, reaching 43% in July compared to the historical average of around 40%. For the upcoming cycle, the trend is expected to be seen in other destinations as well, highlighting arabica on the global stage.

Weekly Report — Coffee

Written by Natália Gandolphi
natalia.gandolphi@hedgepointglobal.com
Reviewed by Pedro Schicchi
pedro.schicchi@hedgepointglobal.com
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 (client.services@hedgepointglobal.com), please contact our internal ombudsman channel (ouvidoria@hedgepointglobal.com) or 0800-878-8408 (for clients in Brazil only).

To access this report, you need to be a subscriber.