The smaller Brazil’s 2022 crop must make Brazil export less coffee, and stocks must fall again. From a revised crop to 57.30 mln bags, supply (stocks + production) must decline 6% in the current season. And this ends up compromising the exportable balance. Thus, SAFRAS projects coffee shipments for the 22/23 season at slightly over 36 mln bags. Down 6% from last season.
Besides the decline in exports, stocks at the end of the season must fall to something around 2 mln bags, remaining at very low levels. The stock-to-consumption ratio must remain at 9%, worsening compared to the previous business cycle (11%). The insecurity regarding domestic supply explains the more aggressive posture of the domestic roasted and ground industry, especially in the purchase of conillon coffee.
This tightness in the current season requires a full crop in Brazil next season for the resumption of stocks and the recovery of the international market share. In this sense, a negative sign in the development of Brazil’s 2023 crop may serve as an impetus for more significant corrective movements in coffee prices on ICE US.