[Report] Coffee market in 2022: The world may have a deficit of 3 million bags of coffee

Vietnamese Coffee Exporter
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[Report] Coffee market in 2022: According to estimates of the Import-Export Department, Vietnam’s coffee exports reached 170 thousand tons, worth 394 million USD, up 22% in volume and 22.6% in value compared to February 2022. Compared to March 2021, it increased by 0.2% in volume and 26.2% in value. This is considered the highest level ever.

According to the International Coffee Organization (ICO), global coffee production in the coffee year 2021-2022 is expected to total 167.2 million bags, down 2.1% from 170.8 million bags in the 2020 crop year. -221. Arabica coffee output reached nearly 94 million bags, down 7.1% compared to the previous crop year. In contrast, robusta production is expected to increase by 5.1% to 73 million bags.

WORLD COFFEE MARKET IN 2022

1. Production

According to the International Coffee Organization (ICO), global coffee production in the coffee year 2021-2022 is expected to total 167.2 million bags, down 2.1% from 170.8 million bags in the 2020 crop year. -221. Arabica coffee output reached nearly 94 million bags, down 7.1% compared to the previous crop year. In contrast, robusta production is expected to increase by 5.1% to 73 million bags.
Recent droughts and frosts have devastated Brazil’s coffee crop this year and curtailed the country’s growth potential for the next two years. The USDA predicts that Brazil’s coffee exports for 2021-2022 will drop 27% year-on-year to 33.2 million bags from a record 45.67 million bags in 2020-2021 due to drought and severe frosts. Coffee production.
However, Conab, on January 18, forecasted that Brazil’s 2022 coffee production would recover 16.8% year-on-year to 55.7 million bags.
Additionally, Colombia, the world’s second-largest producer of arabica, said its March coffee production fell 13% year-on-year to 914,000 bags.
Production in Asia and Oceania is estimated to increase 7.1% in the 2021-2022 season, increasing from 48 million bags to 51.4 million bags.
However, production in South America is estimated to decrease by 7.6%, to 77.5 million bags from 83.8 million bags in the 2020-2021 crop year. In addition, production from Mexico and Central America is expected. Down 3.5%, from 19.7 million bags to 19 million bags.
Africa’s production is estimated to decline slightly by 0.3% to nearly 19.3 million bags in 2021-2022.

2. Consumption

According to the ICO, global coffee consumption in the coffee year 2021-2022 is expected to reach 170.3 million bags, up 3.3% from 164.9 million bags in the previous crop year. As a result, the global coffee market will experience a deficit of around 3.1 million bags in MY 2021-2022 instead of a surplus of nearly 6 million bags in MY 2020-2021. This is also the most significant deficit ever.
This drop was mainly due to the world’s number one producer, Brazil, which harvested a smaller crop. However, the supply and demand situation may change due to a potential recession in the world economy and rising input and production costs. At the same time, consumption declined due to the conflict in Ukraine.
In February, global exports of green coffee reached 9.9 million bags (60 kg/bag), slightly down from 10.2 million bags in the same period last year.
Thus, after the first five months of the crop year 2021-2022 (October 2021 to February 2022), global green coffee exports have decreased by 3% year-on-year to 47.2 million bags.

Exports of the Brazilian arabica group decreased by 15.7% to 16.2 million bags; the Colombian arabica group decreased by 12.7% to 5.4 million bags. However, exports of the other arabica group increased sharply by 17.8% to 8.2 million bags; Robusta coffee exports also increased by 6.7%, reaching 17.4 million bags.

Contrary to the decline in green coffee, instant coffee exports show strong growth.

In February, the total volume of global instant coffee exports increased by 64.9%, to 1.5 million bags compared with 888,000 bags in February 2021.

In the first five months of the crop year 2021-2022, a total of 5.7 million bags of instant coffee were exported worldwide, a sharp increase of 21.7% compared to the same period of the previous crop year (4.7 million bags). Bag). These two countries, Brazil and Indonesia, with export growth of 14.6% and 50.4%, respectively.

Roasted coffee exports also increased 4.2 percent in February to 61,182 bags from 58,733 bags in February 2021.

Figure 1: Export of coffee of all kinds in the first five months of the crop year 2021-2022 (Source: ICO).

From October last year to February this year, coffee exports from South America fell 14.5% to 25 million bags.

During this period, shipments from Brazil totaled only 17 million bags, a sharp drop of 20.3% from 21.3 million bags in the previous crop year. The world’s largest coffee exporter, exports from Brazil fell due to supply chain problems, container shortages, and shipping bottlenecks. On the other hand, Brazil also has a smaller biennial crop of arabica coffee trees.

The world’s third-largest coffee exporter, coffee exports from Colombia also recorded a 10.5% decline to 5.3 million bags as prolonged adverse weather conditions reduced supplies.
Meanwhile, coffee exports from Asia and Oceania increased 21.6 percent to 18.7 million bags in the first five months of the 2021-2022 crop year.
Vietnam, the world’s second-largest coffee exporter, exported 11.6 million bags, a sharp increase of 19.1%. This increase is partly due to the low level of Vietnam’s exports in the same period last year due to logistics problems, container shortages, high freight costs, and seaport congestion in export markets. Mainly the US and Europe.
Notably, India’s coffee exports increased by 48.8% to 2.8 million bags in the first five months of the 2021-2022 crop year.
In addition, Indonesia’s coffee exports increased 16.5% to 3.6 million bags. This increase is due to the strong growth of the instant coffee industry. Indonesia exported 1.1 million bags of instant coffee from October last year to February this year compared with 0.7 million bags in the same period of 2020-2021.
Indonesia’s exports of instant coffee have also nearly doubled from the 0.6 million bags achieved in the same period 2017-2018.

Figure 2: Coffee exports by regions in the first five months of the crop year 2021-2022 (Source: ICO).

Coffee exports from Africa in the first five months of the coffee year 2020-2021 decreased slightly to 5 million bags from 5.1 million bags in the previous crop year.
Coffee exports from Uganda, the largest exporter in Africa, increased slightly by 100,000 bags to 2.4 million bags. However, reduced production due to drought in some coffee-growing regions is causing the country’s coffee exports to decrease. Uganda’s coffee exports fell 20.2% to 449,000 bags in February.
In this region, Ethiopia’s coffee exports in the first five months of the crop year 2021-2022 increased sharply by 24.6% and reached 1.1 million bags. In contrast, Tanzania’s coffee exports fell 5.1% to 530,000 bags.
In Central America and Mexico, the region’s coffee exports in the first five months of the crop year 2021-2022 reached 4.6 million bags, up 13.4%. The region’s exports in February fell 4.1%, to 1.5 million bags.
Honduras, the region’s largest producer, exported only 503,000 bags of coffee in February, down 21.7 percent year on year. According to the Honduras Coffee Exporters Association (AHDECAFE), the country’s coffee production has decreased due to the biennial production cycle and the appearance of coffee leaf rust.
Mexico, the region’s second-largest exporter, exported 1.2 million bags of coffee in the first five months of the 2021-2022 crop year, up 12.7% year on year. In addition, coffee exports from Guatemala also increased sharply by 15.5% to 810,000 bags.

3. Price movements

According to the ICO, the global coffee price index in March fell for the first time in 17 consecutive months, decreasing 7.6% month-on-month, averaging 194.8 US cents/lb.

Chart 3: Global Coffee Price Index tracked by ICO (Source: ICO).

The lowest price recorded was 186.9 US cents/lb on March 15, and the highest was 202 US cents/lb on March 1.
In March, the price of Robusta and Arabica coffee on the world market decreased compared to February 2022 due to geopolitical tensions between Russia and Ukraine.
On the London exchange, on March 28, the price of Robusta coffee delivered for the terms of May 2022, and July 2022, respectively, decreased by 2.4%, 2.3% compared to February 28, to 2,125 levels, respectively. USD/ton, 2,108 USD/ton.
Generally, in the first quarter, the price of Robusta coffee for May and July futures fell by about 8%.

On the New York Stock Exchange, on March 28, the price of arabica coffee for delivery in May 2022 and July 2022, respectively, decreased by 9.8% and 9.2% compared to February 28, to 215, respectively. .3 US cents/pound (equivalent to 4,784 USD/ton), 215.4 US cent/pound (equivalent to 4,786 USD/ton). Generally in the first quarter, the price of arabica coffee decreased by about 2%.

4. Forecast

In the coming time, we believe that the world coffee market will be under pressure from some negative news such as the logistics crisis in Shanghai, inflation pressure, Fed policy, etc.
Currently, Shanghai, China’s most populous city, is still taking harsh measures to prevent the spread of the COVID-19 epidemic. Some traders are concerned that freight rates will increase further while the congestion remains unresolved.
Besides, according to the National Center for Socio-Economic Information and Forecast (NCIF), the obsession with hyperinflation in the US and EU still weighs heavily on the global financial market. However, the worry that the US Federal Reserve (Fed) will be more aggressive in raising interest rates to operate the dollar is growing more extensive and more significant for financial investors and trading commodities.
The conditions for the Fed to decide on a higher rate of an interest rate hike next time appeared when the unemployment rate in the US fell and the price of short-term US bonds (2 years) reversed, i.e., higher than the price in ten years bond. That’s not to mention it is also predicted that there will be 6 more interest rate hikes for the USD this year.
However, in the long term, we believe that world coffee prices will be supported by the news that large water output will decrease while demand is gradually recovering.
The US Department of Agriculture (USDA) forecasts world coffee production in the 2021-2022 crop year to decrease by 8.5 million bags (or 4.8%) compared to the 2020-2021 crop year to 167.5 million bags. (type 60 kg/bag), mainly because arabica coffee in Brazil enters a low yield cycle every two years and is affected by adverse weather factors

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