Brazil's 2019 coffee crop was revised down to 57.05 million 60-kg bags from 58.9 million bags seen in April, consultancy Safras & Mercado said on Thursday, projecting a tight stocks situation in Brazil until the next harvest around May.
The consultancy projects end-stocks from the 2019 season at only 2.32 million bags, compared to 3.17 million bags a year earlier. It said coffee farmers have sold 71% of their 2019 coffee so far, above the five-year average of 68% for this time of the year.
Safras chief coffee analyst Gil Barabach says Brazil will have a stocks-to-use ratio, a widely-used indicator for product availability in the commodities sector, of only 10% at the end of the current season. "This situation, of a tight offer, will help to soften up in the market the impact of a possibly record production in Brazil in 2020," he said.
"It partly justifies the realignment of prices upward in the international coffee market," Barabach said. Coffee prices in New York rose 28% in a month, as news of reduced availability of high-quality coffees led roasters and funds to cover positions in futures.
"It is hard to say where this market will stop in the near term," said Rodrigo Costa, a New York-based broker for Brazilian exporter Comexim, in a weekly note to clients.
"I think that the combination of certs (NY certified stocks) usage with the structure coming in and important moving averages/long-term downtrend lines being pierced, have triggered the funds to cover shorts and get long for the first time since April, 2017," he said about the recent price spike.
Many in the market still believe Brazil, the world's top producer, will harvest a record crop next year, allowing the market to be well supplied. Farmers in Brazil, however, doubt it, saying erratic weather and reduced crop care will hurt yields.
Barabach said the gains in futures and the weak Brazilian currency led to sharp rises in coffee prices in reais, leading farmers to increase sales.
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