USDA projects global coffee production for the 23/24 season at 174.34 mln bags, which corresponds to a growth of 2.5% compared to the previous cycle. In absolute numbers, an advance of 4.32 mln bags, driven by arabica’s production gains, particularly in Brazil. Unlike arabica, robusta must lower its production. The projected improvement for the Vietnam crop is insufficient to offset the problems in other important robusta origins such as Indonesia and Brazil. This production readjustment backs the appreciation of robusta and the rally in London.
In general terms, arabica production must grow close to 7% and account for 55% of the world’s total. Last season arabica accounted for 53%. Robusta must decline by just over 2% and account for 45% of the global total. In the season, it accounted for 47% of the total. Even with the improved performance of arabica, the production dynamics continue to be more favorable to robusta. Robusta production in Vietnam and Indonesia, due to the climate or cutbacks in investment, is showing signs of stagnation. In Brazil, however, there is still room for growth, driven by investments in expansion, renovation and rejuvenation of the coffee-growing area. The recent rally in robusta prices reinforces this positive long-term perception. Arabica, on the contrary, shows signs of a production slowdown. Production in Central America, and especially in Colombia, seems to have reached a production limit in the short term. In this sense, Brazil reinforces its protagonism with arabica and gains more visibility with robusta.
USDA projects world surplus of 4.11 mln bags in 2023/24
The higher production in the 23/24 season makes room for an increase in the external flow, with coffee exports projected at 146.10 mln bags. Increase of more than 4% compared to the previous cycle. And the dynamics of growth in shipments are concentrated in exports of green and soluble coffee, since shipments of industrialized (roasted and ground) coffee must fall.
Consumption, although advancing only 1.2% compared to last season, must reach record levels of 170 mln bags. The global industry must maintain a very cautious posture in the face of the high cost of money and uncertainty surrounding economic growth, particularly in Europe, the United States, and Japan. The projection is that consumption in these regions will be close to the pre-pandemic level. On the other hand, China has been showing dynamic growth above the world average and is already the seventh main coffee consumer in the world. Of course, the volume is still small and concentrated in a segment of the Chinese society, but it is a positive sign amid the lethargy of more traditional markets.
The more active external flow helps to dry up the greater production, and stocks must rise only 0.8% and amount to 31.84 mln bags at the end of the 23/24 season. The projection is that stocks will advance in Europe and the USA and retreat in Brazil. USDA defends the idea of rebuilding reserves through importers, taking advantage of weaker international prices. However, the high cost of carrying stocks must keep limiting stockpiling and result in more coffee held by producers at the end of the commercial cycle.
In general terms, production growth must result in a global surplus of 4.11 mln bags, against 1.76 mln in the previous cycle. The market is having two seasons in a row with production above consumption, after the deficit of 2.89 mln bags in 21/22. The greater slack in production collaborates with a negative realignment in the price curve.
