USDA increases coffee production, but stock-consumption ratio remains tight

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The numbers from the biannual report of the United States Department of Agriculture (USDA), despite projecting an important increase in production, do not indicate a scenario of much slack in supply. World coffee production is projected at 176.24 mln bags, expected to stay 5.6 mln bags above consumption. The highlight is the production growth in Brazil and Indonesia, with production being 4.2% above the previous season, and practically reaching the level of the record crop reaped in 2020/21, which reinforces the movement toward the resumption of production after the 2021 frost in Brazil.

There are some questions about the USDA’s excessive optimism, especially regarding robusta production in Vietnam, estimated at 27.85 mln bags. This number was well above the projections of some trading companies and the official signal from Vietnam’s Coffee and Cocoa Association (Vicofa), somewhere between 22 and 23 mln bags. The drought, very high temperatures, and the outbreak of pests justify this market pessimism. Even with the return of moisture, rainfall is still below normal in this period of transition between El Nino and La Nina, which also generates pessimism about production in Vietnam.

In any case, production must grow above consumption and generate a surplus. However, this productive effort will be directed, in large part, to rebuilding stocks, which are expected to grow 8%, after three seasons of decline. But even with this advance, the stocks should still be below the 22/23 season and well below the 37.49 mln bags in 20/21. The level of coffee stocks helps to clearly differentiate the two realities. The global stock-consumption ratio should be just over 15% in 24/25, while in 20/21 it hit 22%. At that time, the world was coming from a sequence of high crops, while now in 2024, world production is still recovering. Perhaps, in a scenario with a Vietnam crop closer to 30 to 31 mln bags, as initially expected, and with stocks rising to the range of 28 to 29 mln, the situation would be different. But this is not the case with the 24/25 season, again marked by weather problems in Southeast Asia.