Sep 13 / Laleska Moda

Japanese stocks drop, but consumption nears 22/23 levels

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  • The latest figures from the JCA (Japan Coffee Association) indicate that Japanese stocks fell to 2.4 million bags in July compared to May. On a year-over-year basis, the volume remained stable, although stocks are still below historical averages.

  • Apparent demand for the 23/24 season (Oct/23-Jun/24) is also below historical averages but is already approaching 22/23 levels. This also supports our expectation that total demand for the season will be similar to 22/23, at 6.2 million bags.

  • Looking at the latest import data from the Asian country, it is also clear that the share of Brazilian grain in the total volume is increasing. Another noteworthy trend is the decline in the share of other producers, such as Vietnam, reflecting limited stocks and production problems.

  • In Brazil, August exports reached a new monthly record of 3.7 million bags, up 0.7% from last year. Shipments were mainly driven by conilon, which has been gaining ground on the international market due to limited supply in Southeast Asia.

Japanese stocks drop, but consumption nears 22/23 levels

The latest Japanese stock data released by the JCA shows a decline of 3.3% between May and July, with the volume falling to 2.42 million bags. Although inventories for this period are at the same level as in 22/23, they are still below historical levels of 2.8 million bags.

Although lower stocks are a supportive fundamental for prices, the Asian country's apparent demand has been reduced since 2022, especially between 2022 and 2023. However, apparent consumption for the 23/24 season (Oct/23-Jun/24) has stabilized, with a cumulative volume similar to 22/23, at around 4.7 M bags. Given this scenario, we will maintain our initial forecast of total demand from Japan of around 6.2 M bags, practically stable compared to 22/23.

On the other hand, it is important to monitor the monthly evolution of consumption in the second half of 2024 for the 24/25 estimates, as high coffee prices could still have a negative impact on Japanese and global demand for the commodity. In general, prices continue to be supported by supply-side concerns, particularly in Vietnam. In addition to lower production in 23/24, the 24/25 season has been affected by high temperatures and drought in early 2024 and now by the possibility of excessive rainfall during the 24/25 harvest.

Japanese Stocks – JCA (M bags)

Source: JCA

Japan Apparent Consumption (M bags)

Source: JCA, Hedgepoint

Japan – Imports by Country/Group (‘000 bags)

Source: JCA, Hedgepoint

The decline in Vietnamese supply is also reflected in Japanese imports, with the share of Asian countries falling from 34.2% in 22/23 to 33.1% in 23/24. The share of imports from other countries, such as those in Latin America, with the exception of Brazil, also declined. The latter benefited from the production problems in other origins and increased its share from 33.4% in 22/23 to 37.5% in 23/24, a trend also observed in other destinations, especially in the case of conilon/robusta.
The latest figures for Brazilian exports also confirm this trend. According to Cecafé, a total of 3.73 million bags were shipped in August, up 0.7% from 20/23 and a new record for the month, with conilon standing out. While Arabica shipments fell 6.6% year-on-year to 2.49 million bags, conilon exports totaled 924.6 thousand bags in August, up 31.4% from Aug/23 and a new monthly record for the entire historical Cecafé series. It's worth noting that demand for conilon has even kept the spread between it and arabica negative, as discussed in last week's analysis (link).

Brazil – Arabica Exports (M bags)

Source: Cecafé

Brazil – Conilon Exports (M bags)

Source: Cecafé

When we analyze Brazilian exports by destination, the growth in conilon shipments is also evident. Although Arabica also increased its share in the main destinations in 2024, Brazilian conilon made significant progress in markets such as Europe, Japan and especially other Asian countries.

Soil Moisture – South of Minas – Brazil (mm)

Source: Cecafé, Hedgepoint

Precipitation (mm) and Temperature (°C) Anomaly – Brazil – Sep.

Source: Cecafé, Hedgepoint

In Summary

The latest data from the JCA shows that Japanese coffee stocks have fallen again and are still below historical averages. On the other hand, apparent demand for 23/24, which has been declining in recent seasons, is showing signs of stabilizing, which supports our initial expectations of stable demand in 23/24. It should be noted, however, that in the medium to long term there is still a risk that high prices will have a negative impact on coffee consumption.

The commodity continues to be supported by climatic uncertainties and their potential impact on global production, particularly in Vietnam. It is worth noting that the weather in Brazil has also recently increased market risk - due to the possible impact of the drought on 25/26 - especially as the country has strengthened its role as the world's main coffee supplier while other countries are facing supply problems.

In this sense, Brazilian coffee exports continue to break records, driven mainly by Conilon. Data by destination show that the variety has seen a significant increase in places such as the European Union, Japan and other Asian countries. Thus, with the expectation that global supplies of Robusta will remain tight in 24/25, we expect national shipments to continue at high levels, especially for Conilon.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Victor Arduin
victor.arduin@hedgepointglobal.com
www.hedgepointglobal.com

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