68681 views May 4, 2016 posted by Maja Wallengren

MARKET ANALYSIS: World Coffee Market Continues In Defecit and 2016-17 Could be Worse


JUNE 10–As coffee regions accounting for over 60 percent of the total harvest currently are being hit with frost, the figure may come down further. We are constantly evaluating all the data and information available from across the Brazil’s growing regions and will update the story regularly.

*JUNE 4–Back from an intense 12-day crop trip traveling 3000 km across Minas Gerais and parts of Sao Paulo, SpillingTheBeans can confirm a crop better than last year in Brazil but we are NO WHERE close to a record or even a big crop. Figures for Brazil’s new 2016-17 crop are RAPIDLY coming down, both because of persistent damage from the last three years drought to Arabica tress, but even more as of late because of massive damage to Brazil’s Arabica harvest ACROSS the key region of Southern Minas where between 30 and 50 percent of the new crop fell to the ground after extreme unseasonal heavy rains. At this point it is very difficult to see the new harvest producing more than between 47 million and 48 million bags.

*MAY 9–Market tries to break through $1.30/lb barrier, but bears still keep pressure on lower side. Vietnam is expecting the smallest crop in 4 or 5 years, Indonesia is AGAIN suffering severe El Nino effects, India’s new harvest is seen at a 19-year LOW and Brazil’s key Nr 2 coffee state of Espirito Santo still facing drought. Yet we still see prices at below $1.30 per pound and sharply below the cost of production. Roasters and coffee lovers beware, it’s time to buy coffee, the party is over!

The supply problem for the market is far from over. Even though forecasts for Brazil’s new 2016-17 harvest seem to agree that a bigger crop could be in sight as of next June — which would be welcome news after last year’s 2015-16 disaster crop, which ended as one of the smallest in a decade — the conilon (robusta) harvest in Brazil’s key Nr 2 growing state of Espirito Santo is STILL suffering from drought, now in its 4th consecutive crop cycle. Global consumption, meanwhile, has expanded by ASTOUNDING volumes. SpillingTheBeans are currently working on the latest number crushing, and it does not look good! Please stay tuned, we will be back with all the latest analysis and forecasts in the next weeks but until then you can brush up on the background still affecting the market here below and, YES, this article is AGAIN back on popular demand after SpillingTheBeans initially published this analysis in July, 2013 Sadly, however, the situation and data remains largely unchanged as far as the underlying fundamental issues affecting the supply chain are concerned and data points to continued and even more extensive problems for growers today than one and two years ago. Read on to learn why.


EXCLUSIVE SpillingTheBeans Market Analysis: Evidence is building fast to support that a deficit in the supply-demand balance is building in the world market coffee for the 2013-14 crop and marketing cycle that officially starts in October. During the last few weeks all the crop forecasts for the world’s main coffee growing countries have come down one after the other. This was made more obvious in the 1st official forecast for the 2013-14 year released by the U.S. Department of Agriculture (USDA) which not only confirmed that production across Central America, Mexico and Peru is going to fall by between 15 and 20 percent on average because of the ongoing outbreak of the crop pest rust fungus. But the USDA furthermore confirmed reports of significant weather damage to crops in both Vietnam and Indonesia, the world’s second and third largest producers, and both countries are now expected to see smaller than expected crops for the second consecutive years due to erratic weather.

(–Yes, SpillingTheBeans wrote this article in July, 2013 but, sadly, the situation and data remains unchanged, and if any, data points to even more problems for growers today than 5 months ago, including that most forecasts for Brazil’s both current 2013-14 and next 2014-15 crops have been revised down)

MARKET ANALYSIS: World Coffee Market Headed For New Deficit in Both 2014-15 And 2013-14 Crops
JUL 15, 2013 (SpillingTheBeans)–In breaking news today, leading Brazilian exporters and traders COMEXIM said it had been forced to reduce its forecast for the new Brazil harvest by a whopping 3.8 million 60-kilogram bags to a total of 49.4 million bags. The Santos-based trader took this desicion after a careful evaluation of the now completed Connillon harvest of Brazil’s robusta crop, which confirmed that drought in January and February had caused significant damage by limitting bean size and overall cherry development in the final phase of flowering, which is known as the bean formation process.

It’s not for nothing that SpillingTheBeans has insisted that the world coffee supply and demand balance is a lot more precarious than what most in the bear-camp of the market has wanted to acknowledge. The evidence of crop impact from erratic weather and climate change has been visible since the onset of flowering for the 2013-14 as well as it was in the last 2012-13 harvest. Interviews with producers on the ground during first hand crop visit by SpillingTheBeans in all these countries have confirmed this predictions for most of the last year.

With 3.8 million bags less in Brazil, here goes the final buffer that was meant to make up for smaller crops elsewhere in the world of coffee ahead of the next harvest cycle and ahead of the main coffee roasting season in the U.S. which starts in September and October. The current market conditions and prices well below the cost of production in producing countries, including Brazil, only brew further trouble and volatility in the months ahead and for those who do not make sure to cover their contracts and physical needs soon, beware it could turn out to be very costly to wait.

Traders and analysts have across the board been cautious in their projections for Central America and to what extend the harvest is expected to suffer because of the rust disaster. This can be justified due to the fact that flowering and final bean formation is still ongoing in many of the producing regions and to date exports have not been reported dramatically down from the 2012-13 harvest. Colombia is at the same time enjoying a modest recovery and can be expected to add about 1 million bags in production during the next years to a total of between 9 and 9.5 million bags. While this will ease some of the losses from Central America, it will still fall short of at least 2.5 million to 3.5 million bags from the Colombian average of annual output between 11.5 and 13 million bags seen up until five years ago.

Based on all these figures, unless a miracle happens – such as perfect weather, but then when did that ever happen? – the world coffee balance is headed for a total of between 142 million and 143 million bags of production in the next 2013-14 crop cycle, while consumption is headed toward between 144 million and 145 million bags. And this might easily be in the best case of scenarios.

Only question remains, what will happen when The Funds decide to cover their net short positions of between 9.2 and 9.5 million bags?heart

-Editor’s note: At the time of initially writing this piece in July 2013 the funds were still holding net short positions near record highs but as of July this year the funds are net long. The basic fundamentals and multiple problems causing a deficit in the supply chain, howwever, remain unchanged as does the very low stocks in the world market currently available.

*For the USDA’s latest forecast for the 2013-14 world coffee market outlook released December 13, 2013, please see:


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  • Maja, you emphasize a perspective from the production side that, as often occurs, does not translate into the stock exchange. We are living a little bit on the edge, plantations evaluating a shift to another crop, disease that will downsize production in critical areas, and futures prices on the lower side of desirable range. A good article, and thank you for sharing this. Definitely food for thought. Saludos amiga.

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    This is a good job! Thank you very much for your valuable contribution to the World coffee industry through every thing coffee. I like coffee and will never stop growing because it opened my way to school as well as my carrier path. My future plan is to contribute towards improved coffee production in Tanzania through research and extension especially on organic coffee production. Kindly help me with links/contacts for major buyers and/or consumers of Tanzanian coffee if possible.

    All the best,

    Mawazo Shitindi, (Tanzanian citizen currently in Alabama USA for my PhD)

    • Asante Sana Bwana Mawazo! Your comment is much appreciated, please write me via the contact page and I’ll be happy to try to help with some contacts 🙂

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    • Vielen Dank, Ich bin Sehr geehrt 🙂

  • I drop a leave a response each time I appreciate a post on a website or I have something to valuable to contribute to the conversation.
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    • Thanks for your kind words and for my other coffee news, most of it comes either via Facebook or Twitter, links for both here in the upper corner of the page. You can also sign up to the monthly news letter right here, next one coming out in the next few days 🙂

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  • Just as you have been saying all along. Where are your nay-sayers now Maja?

    • Haha Bernie, still quite a few of them around but they will come around soon enough, and sooner rather than later 🙂

  • Asking questions are truly good thing if you are not understanding something fully, however this article presents nice understanding even.

  • […] For more analysis from SpillingTheBeans on the next crop, please see our “Market Insight” section: https://globalcoffeefund.com/market-analysis-world-coffee-market-headed-for-new-deficit-in-2013-14-… […]

  • […] out this article about a looming coffee DEFICIT. As you know, I remain long the JO ETN inside 12631. So, yes, I am […]

  • funds are not short..they are net long – don’t mislead people

    • Thanks for your reply, and I am happy to let you know there is no misleading here. It is mentioned multiple times that this article initially was written in July 2013 when the funds were at near record shorts. The reason this particular post has received so many hits and still get circulated widely across the web is that many many people are trying to catch up on the background on what and why led to the price rally this year, and I was one of the only analysts who predicted this correctly, based on many of the fundamentals mentioned here. But remain assured that I soon will have a brand new analysis up with all the latest figures.

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  • Just a note to say that you were not the only person predicting a coffee deficit this season or next back in June 2014. The fact that you take a victory lap in every article has made me stop coming back to this site. If you had your own data or a much more specific 2015 prediction would be more helpful than noting something you said 2 months ago…the market is forward looking.

    • Hello Bob, thanks for your comment, I appreciate your interest. I think you are misreading my article, because it states very clearly that this report was initially written back in July LAST year — not June this year. Back then everybody told me this was ridiculous because there would be MASSIVE volumes of coffee available, but I have insisted that based on my knowledge of producing countries and the multiple issues at stake with the crops after years of low prices, and a very damaging drought in Espirito Santo in the spring of 2013, the Brazil crop was unlikely to recover by 2014-15, i.e. still the current article. The reason this article is still circulated is because it has been widely popular and widely circulated on social media, and hence it keeps popping up, but I have therefore addressed the time-issue by making the date and time of publication more clear in the post itself, as well as adding the current stock situation. If there has been any other people projecting – and publishing – such predictions all that way back, I would love to get in touch with them and publish their reports on my blog — I am all for as much access to as much information as possible. All that said, you might be aware that my social media account and in part my blog were hacked for most of the past four months, so my new forecast for the 2014-15 coffee year and the 2015-16 harvest in Brazil has been delayed. But I am working on it and expect to have that ready for publication in the next few weeks. Happy coffee drinking 🙂

    • As a grower, exporter and roaster with a farm in Nicaragua, there is no such thing as specific and empiric data that are concrete and predictable to be certain of coffee’s future. This is why it’s a speculative market. Every day, coffee traders wait for rumors, estimates, pre-estimates, ICO’s reports. Then there are companies such as Mercon’s Group for their selfish reasons that purposely drive down prices so to take advantage of coffee’s speculative nature by predicting 50 million bags from Brazil when many of us know it is much lower. One farm’s demise and another’s prosperity means nothing. One country’s drought right now such as Guatemala, and Nicaragua’s heavy rainy season doesn’t predict the global coffee harvest. The market of coffee and it’s horticulture is so large and complicated, no one can make certain predictions, but getting a broad perspectives we can always get close. And if the booms and busts of Brazil, Colombia and Vietnam are big or small, it does affect the market significantly. Coffee isn’t like corn or sugar. A bad year for corn, a farmer can plant something else. Coffee takes 5-6 years from seed to production. A farmer can’t predict the market 5 years into the future. if coffee doesn’t flower properly, then no amount of investments can make coffee recover. A disease such as rust or severe drought of Brazil doesn’t harm coffee for 12 months, but harms it for 24 months.

      We all have our perspectives and want to drive home points. In this market, there is competition for good information filled with false information. Starbucks is notoriously good at making positive coffee supply news knowing their words will drive down prices. What Maja’s blog and other posts on this site try to do is being realistic and try to push back the Starbucks, Mercon’s “speculation” that tries to drive down coffee “c” price. And if the opinion’s are a bit assertive and loud, it’s needed to push back the agenda’s many of these large organization.

      So who’s opinion do you trust, ICO, Volcafe, Starbucks, Mercon, Anacafe, Cecocafe, Cooxupe? Every one of these group has their own agenda. Cooxupe always low ball their estimates because the want a higher coffee price, Starbucks, Mercon, over-estimate the harvests to lower the price. In coffee, specifics you may want have agenda’s attached by the group that reports them. Ultimately, no one has the absolute specifics, but many of us can get close to a good speculation that help us plan for the following 2 years!

    • Hello Scott, nice to see you back here and thanks so much for taking the time to explain all these thoughts and considerations as to coffee from crop to the markets, it’s extremely valuable for all readers to hear what you have to say from your position as a grower. Hope all is well your end, Maja 🙂

  • I’m impressed, I have to admit. Rarely do I come across a blog that’s equally educative and interesting, and let me tell you, you’ve hit the nail on the head. Thee problem is something too few men and women are speaking intelligently about.
    Now i’m very happy that I came across this during my hunt for something concerning this.

  • Hi Maja,

    To what extent do you think increased production in Colombia might offset decreased production in Central America as a result of Roya?

    • Hi Henry, that’s a question that everybody are looking at and there is no doubt that the recovery in Colombia helps to offset about 2 million bags of the losses from Central America. But if you consider that Central America and Mexico alone have lost about 6 million bags that’s still a far cry from reaching the balance and the key problem here is that all this coffee is going to take a very long time to come back.

  • Please let me know if you’re looking for a writer for your weblog. You have some really good articles and I believe I would be a good asset. If you ever want to take some of the load off, I’d love to write some articles for your blog in exchange for a link back to mine. Please shoot me an e-mail if interested. Kudos!

    • Thanks Reggie, appreciate the interest and I always welcome contributions if it’s about coffee 🙂 Please write me directly via the contact page on the blog with the articles you are interested in writing. Maja

  • Follow up on your ICO tweet for the ICO September market analysis:

    Estimated world demand in 2013 145.8 million bags.
    Final 2013-2014 world production 145.2 million bags.
    Deficit in this comparison is 0.6 million bag deficit.

    Now Brazil has cleared out its 2013 inventory and with 2014 world demand up 3 million bags a year, the demand for 2014 should be 149 million bags. And if world production stays the same, there will be a 3.8 million bag deficit. 2014-2015 for Brazil is their lower production year. But Central American. Colombia will make up for some of the deficits. And some rain is returning this week to save Brazil’s flowering in Minas Gerias. I follow the website Hoosieragtoday.com for daily S. American weather that involves soy and coffee areas every morning under its Morning Outlook.

    • Hi Scott, great to hear from you and just for the record, i am actually working on a follow-up report to my tweet because this report is just making ICO stats becoming ridiculous for all the same reasons you mention here; How can you talk about a year “in balance” when you use 2013-14 production against demand in 2013? The demand in 2013 is all gone and DRUNK, and the 2013-14 production is feeding demand in 2014, which as you say at a very very minimal is about 149-149M bags. SO in the BEST case scenario we have ADDED a deficit of at least 3 million bags all going from the few stocks on record. Love the fact that you bother to respond and with so much detail, thanks SO much. I will post the follow-up report later today or tomorrow, and would LOVE if you could repeat your reply there 🙂 All the best, Maja

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  • Wow, what a fascinating story, my younger sister is analyzing such things, so I am going to let know her.

  • My first time to encounter your web. I was really amazed and so glad your true to life stories about coffee. I am planting and drinking coffee and sharing as well the coffee technology and supply chain in the Philippines.
    Thank you for all the facts and figures and your analysis on the entire coffee industry, especially your inclination to the marginalize coffee farmers. Mabuhay ka!

    • Thank you so much David, your comments are much appreciated and rest assured I will continue to keep all this work up, especially the focus on the socio-economic realities of farmers in producing countries. Maja

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