Aug 2 / Laleska Moda

European Stocks rise in June, but remain bellow historical averages

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  • The European Coffee Federation (ECF) released its stocks report on July 31st, showing an increase in stocks in recent months. However, June stocks (8.41 M bags) remain below the historical average for the period (13.26 M bags), which could support prices in the coming months.

  • In terms of type of coffee, both natural and washed Arabica showed a slight increase in the last two months, while the Robusta coffee has a more substation growth. However, stocks for the three types are also below historical levels.

  • The reduced stock levels mainly reflect weak imports from the EU between 2023 and early 2024, combined with resilient domestic demand, leading to a rapid decline in inventories between mid-2023 and March/24 to the lowest levels in recent decades.

  • Looking at the cumulative figures for 23/24 (Oct/23-May/24), EU imports remain 921.76 K bags below average and 914.82 K bags lower than last year.

  • Regarding the origin of the imported coffee, we see a surge in Brazilian beans during the 23/24 European season, mainly due the decrease in imports from Vietnam, India and Indonesia. Meanwhile, for washed arabica, there has been an increase in the import shares from Colombia and Peru, to compensate the drop in Centrals and Mexico.

European Stocks rise in June, but remain bellow historical averages

This week, the European Coffee Federation (ECF) released stock figures up to June, showing a strong increase of 1.33 M bags compared to April (+18.8%) - the last reported number - to reach 8.41 M bags. However, European June figures are still 3.15 M bags below Jun/23, a significant drop of 27.3%. Compared to the historical average for this period (13.26 M bags), the decrease is even greater, at 4.85 M bags or -36.5%.

This trend was also observed by coffee type, with robusta, natural and washed Arabica stocks well below historical levels in June. Compared to the April data, all types showed an increase, with robusta having a stronger recovery trend with an advance of 35.7%, while natural and washed arabica increased by 18.1% and 5.7% respectively.

The lower numbers mainly reflect weaker imports from 2023 to early 2024, combined with resilient demand that has led to a reduction in European inventories since last year, reaching its lowest level in March/24, at 6.4 M bags. Cumulative imports figures for the 23/24 season (Oct/23-May/24) in the EU are still 921.76 K bags below the average levels of the last 5 years and 914.82 K bags less than the volume reported during the same period in the last cycle. On the other hand, apparent consumption is almost 360 K bags above the historical average.

 European Coffee Federation Stocks (M bags)

Source: ECF

European Coffee Federation - Stocks per Type (M bags)

Source: ECF

On the other hand, its good to notice that the trend for the last months has been of an increase of imports, with 2024 cumulated figures, reaching 20.3 M bags until May, a lightly increase of 1.6% from the historical averages and up 4.9% from the same period of 2023. The scenario of lower stocks may also mean that European countries will continue to export more in the coming months, which could also support coffee prices

European Union – Green Coffee Imports (M bags)

Source: Eurostat, Hedgepoint

European Union – Imports by Country/Group (‘000 bags)

Source: Eurostat, Hedgepoint

Regarding the coffee imports origins, some interesting trends can be observed when looking at the 23/24 cycle. In the period from Oct/22 to May/23 (22/23 season) the imports from Vietnam, Indonesia, and India accounted for 33.9% of the total volume, however, in the same period of 23/24, this share fell to 27.8%. This behavior was to be expected given the crop failures in Vietnam and Indonesia in 23/24. While there was some reaction in the last months of 2024, European imports from these countries may continue to be at the lower end, especially given the limited stocks in Vietnam. The slow start of exports from Indonesia could also contribute to this scenario, even if a higher crop is expected in 24/25.

On the other hand, this scenario favors Brazilian exports to the region. While in 22/23 Brazilian beans accounted for 33.5% of total European imports by May/23, this figure rose to 41.4% in 23/24. Brazilian export data in recent months have also shown an increase in shipments of arabica and especially robusta to the EU, due to the decline in Southeast Asia. Brazilian shipments to the EU are therefore expected to remain high in 2024, especially in the case of conilon.

In the case of washed arabica, imports from Central America and Mexico declined steadily up January of this year, but this was offset by an increase in the share of Colombian and Peruvian coffees.

In Summary

The recent increase in ECF stocks is in line with historical seasonality, but also reflects changes in trade flows compared to the second half of 2023. In this case, it is important to highlight the increase in Brazilian shipments to the EU, given the supply limitations in Southeast Asia. Robusta imports have also shown a more significant improvement compared to the arabica types, highlighting the resilient demand of the former.

Nevertheless, European stocks remain well below historical averages – mainly reflecting lower imports in 23/24, so far – and could be a bullish point in the short to medium term. It is good to note, however, that as soon as the destinations start to reduce the benchmark rates, these stocks could become a bearish fundamental in the future.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Thais Italiani
thais.italiani@hedgepointglobal.com
www.hedgepointglobal.com

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