Oct 14 / Laleska Moda

Brazilian exports continue to soar while supply in Asia remains tight

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  • Brazil has exported 4.4M bags of coffee in September, a new record for the month. For green coffee, arabica exports increased to 3.2M bags, while conilon reached 912k bags, both above the 2023 and historic levels for the period.

  • Cumulative figures for the 24/25 season also shows a substantial increase from previous cycles, specially for the conilon, given the decline Vietnam exports in the last months. This also gives support for an expected record export in 24/25.

  • Shipments, however, could be affected by the possibility of the EUDR postponement – given the substantial growth in EU imports in the last months -, and the start of the harvest in Vietnam, that would increase the supply in the short term.

  •  On the other hand, medium to long term is still supportive of Brazil exports, given the substantial decrease in Vietnam exports in 23/24 and the expectations of a reduction of the production in the Asia country in 24/25.

Brazilian exports continue to soar while supply in Asia remains tight

Brazil coffee exports continues to break new records: September total volume is a new milestone for the month, at 4.4 M bags, representing an increase of 33.3% in relation to 3.3 M bags shipped in Sep/23. There was a significant rise on green arabica coffee volume that, after a slightly drop in August, reached 3.19 M bags, up 31.9% or 773k bags from a year ago. While green conilon/robusta exports did decrease from August figures, compared to Sep/23 there is still an increase of 40.9% (or 264k bags) to 912 k bags, whit shipments for the variety way above historic average levels.

Cumulative figures also highlight this trend. For the 24/25 season (apr/24-sep/24) arabica exports reached 17.5 M bags, up 26.5% (+3.5M bags) from the same period of 23/24, while robusta cumulative were of 5.1 M bags, a growth of 2.8 M bags (or 120.8%). These volumes are also the highest ever recorded in Cecafé data for this period (apr-sep) for both varieties, indicating that the 24/25 may end with a new record in exports. This is also expected since other origins are facing lower production levels in 24/25, especially Vietnam, with Brazil increasing its share and importance in the market as the major coffee supplier in the world.

Brazil- Green Arabica Exports (M bags)

Source: Cecafé

Brazil -Green Conilon/ Robusta Exports (‘000 bags)

Source: Cecafé

However, there are a few risks that could affect shipments in the coming months. Firstly, the possibility of a delay in the implementation of the EUDR may reduce buying pressure from Europe in the short term, as we discussed in our previous report (link). This is an important point, as when looking at the cumulative 2024 figures by destination, it is clear that the EU has significantly increased its share of imports of the Brazilian bean. Arabica green imports of the bloc had increased by almost 3 M bags from average levels (31.8%), while conilon imports have risen by almost 2 M bags (320.2%), mainly reflecting the drop in Southeast Asia.

This surge in imports from Brazil has been helping to rebuild EU stocks and with a possible delay in the EUDR, European exporters and companies may reduce imports from Brazil in the short term. On the logistical side, although there seems to be some improvement in Brazilian ports, we may still face shipping delays in the coming months, which could also affect coffee exports.

Brazil – Arabica Green Imports by Country/Region (bags)

Source: Cecafé

Brazil – Conilon/Robusta Green Imports by Country/Region (bags)

Source: Cecafé

On the other hand, supply in Asia could increase by the end of the year. Despite some expected delays due to high rainfall, the 24/25 harvest in Vietnam is due to start in the coming weeks, which could increase the supply of robusta beans on the market in the short term, putting downward pressure on prices and reducing demand for the Brazilian bean in the coming months.

In the medium to longer term, however, Brazilian conilon exports are expected to remain above average as the Vietnamese 24/25 crop is expected to be smaller. While rainfall has been positive since July, the general market view is that the drought and high temperatures from the first half of 2024 will impact productivity levels in the Asian country. Our forecast is for 27.2 million bags of coffee to be produced in Vietnam in the 24/25 cycle, a reduction of around 500,000 bags from the 23/24 cycle.

It is worth remembering that Vietnam has seen a decline in coffee production in recent cycles due to a reduction in area and adverse weather conditions, which has already impacted on exports. For example, the 23/24 season ended with exports of 25.1 million bags, down from 27.6 million bags in the previous season, due to tight supplies, and our expectations for 24/25 are also for below average shipments.

Interestingly, this has also led Vietnam to import more coffee, especially from Brazil, as seen in the Cecafé data. In this sense, the trend in 2024 has been an increase in exports from Brazil to Asia, especially to countries like Vietnam, as mentioned above, but also to Indonesia and China, reinforcing our expectation of higher exports in 24/25, even with a possible shift in the EUDR.

Supply and Demand – Vietnam (M bags)

Source: Hedgepoint

Coffee Exports – Vietnam (‘000 bags)

Source: Refinitv

In Summary

Brazilian exports continue to show strong figures as supply from other origins is limited. Not only have arabica exports increased, but conilon continues to set new records, supporting expectations of stronger shipments in 24/25.

However, there are some conditions that could affect Brazilian exports in the coming months, such as the possible delay in the implementation of the EUDR and the increase in supply in Vietnam as we approach the 24/25 harvest. On the other hand, there is a growing consensus of a smaller crop in Vietnam this season, which could affect the country's exports in the coming months.

It is worth remembering that lower supply in the 23/24 crop has already led to a reduction in the country's shipments, which could be positive for Brazilian exports in the medium to long term as Brazilian beans increase their share of the global market.

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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