Nov 4 / Laleska Moda

EU stocks increase, but remain below average levels

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  • The last report of the European Coffee Federation (ECF) indicated that EU stocks recovered over the previous months. Interestingly, there was a significant increase in robusta and washed arabica types on stocks.

  • Despite the increase, stocks continue to be below 2023 and average levels. However, considering current import and demand levels, there might still be room for a recovery from last year's levels in the coming months.

  • European coffee imports significantly increased over Q2 and Q3 compared to previous years, likely due to the EUDR effect, and could show a positive performance on Q4.

  • On the demand side, while apparent consumption is higher than average levels, it remain below 21/22 and 22/23 cumulative.

  • While there is still expectation of higher stocks levels in the coming months, due to an increase in imports, current demand levels indicate that the recovery is still limited.

EU stocks increase, but remain below average levels

Data from the European Coffee Federation (ECF) indicates a recovery in EU coffee stocks in August, to 8.85 M bags of coffee, after reaching its lowest levels early this year. All types of coffee stocks increased, but especially from robusta and washed arabica, in line with higher imports from Central America, East Africa, and Brazil between April and August, origins that export these type of beans.

However, despite the increase, EU stocks remain below 2023 and historic average levels. While is unlikely that the stocks will come back to average levels any time soon, there might still be room for a recovery from last year's levels in the coming months. The main reason is the recent import pace and current apparent demand estimates.

European Union Stocks - ECF (M bags)

Source: ECF

European Union Stocks – by Type of Coffee (M bags)

Source: ECF

Since early 2024 European imports have risen, reflecting the worries over lower stocks – in March, the inventories were at 6.4 M, the lowest levels in decades – and the upcoming EUDR implementation in December. This also drove a substantial increase in Brazilian coffee imports, particularly as supplies from other origins tightened during their off-season. This was mainly observed with robusta imports, which remained above average levels through the first half of 2024. This trend may also be reflected in the notable recovery of robusta stocks from April onward.

Looking at cumulative European Imports throughout the quarters, it is also interesting to note that the volume in Q2 and Q3 was above past season levels, indicating a higher import rate in the past months. Although the possible postponement of the EUDR could lead to a reduction in European demand in the coming months, Q4 is likely to record a significant volume as much of this coffee was already purchased before the Commission proposed the delay.

EU: Imports by country/gourp (000’ bags)

Source: Eurostat, Agridata

EU: Share of imports by type of coffee

Source: Eurostat, Agridata

As mentioned before, this could also contribute to the recovery in EU stocks. Interestingly, when looking at the spread on robusta contracts, up until recently, the X-F spread was trading at its highest levels in years, but there was an inversion in recent weeks, likely reflecting the expectations of more comfortable supply of the variety, with the increase in global exports of the bean, recovering stocks and the upcoming Vietnamese harvest.

As for the arabica spread, they are below 2022 and late 2023 levels – when there was an increased perception of lower supply – but the Z-H spread is indicating a slight worry on the production side, as there still uncertainty over the 25/26 crop in Brazil, although weather has been more favorable and could lead to downward pressure on prices in the coming weeks.


LN Robusta X-F Spread – Seasonal Chart (USD/mt)

Source: Refinitiv

NY Arabica Z-H Spread – Seasonal Chart (c/lb)

Source: Refinitiv

On the other side, it is also important to remember that European (and other destinations) inventories are unlikely to return to average levels, due to a still resilient demand. In the EU, for example, apparent demand in the 23/24 season (Oct/23 – Aug/24) indicates that, while still below 22/23, consumption is already above previous season and average levels, at 40.4 M bags. Its also worth remembering that we are heading to the North Hemisphere winter, when coffee demand tends to grow.

EU: Total Coffee Imports by quarter (M bags)

Source: Eurostat, Agridata

EU: Aparent Consumption (M bags)

Source: Hedgepoint

In Summary

The ECF stocks indicate a recovery from April to August, in line with the increase of EU imports in 2024. Although the potential postponement of the EUDR could lead to a decrease in imports in the short term, this year is still likely to record higher European imports, which could, in turn, benefit a further increase in EU stocks.

This expectation of an easing in the supply side has also been reflected in future prices, especially with the return of the rains in Brazil and the upcoming 24/25 robusta harvest in Vietnam.

On the other hand, apparent consumption in the EU has shown resilience. While below 22/23, consumption is still above average levels, which may limit European stocks' recovery in the medium term. While this scenario is similar in other destinations, in origins, we still expect a decrease in stocks in the 24/25 season, possible giving some support to prices on the long term.

Weekly Report — Coffee

Written by Laleska Moda

laleska.moda@hedgepointglobal.com

Reviewed by Livea Coda
livea.coda@hedgepointglobal.com
www.hedgepointglobal.com

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