LONDON: The global coffee market could have a surplus of 4.1 million 60kg bags in 2018/19 as production in top growers Brazil and Vietnam rebounds, Rabobank said in its quarterly report on Wednesday.
The bank forecast global coffee output for the 2018/19 season reaching 167.3 million bags, up from an expected 155.6 million bags in the current 2017/18 season.
A sharp increase in production is expected in top grower Brazil, which is currently in an off-year in its crop cycle. Output is seen at 59 million bags in 2018/19, up from 49.2 million this season.
Production in Vietnam, the world's biggest grower of robusta coffee, is expected to climb to 29.4 million bags, from 28.7 million bags in 2017/18.
"On the robusta side, we see a very small surplus in 2018/19 and this is likely to support robusta prices through 2017," Rabobank said in its report.
"It is possible that we will see a jump in 2018/19 production in Vietnam to over 30 (million) bags, given the stellar robusta prices."
Global consumption for 2018/19, meanwhile, is seen at 163.2 million bags, up from an estimated 159.7 million bags in the current season.
The resulting surplus of 4.1 million bags would partially help to replenish stocks in consuming countries, which Rabobank expects to fall by at least 3 million bags in the current season amid sluggish exports from Brazil.
However, the bank sees the world coffee market returning to a deficit in the following season as lower prices filter through and demand growth picks up.
"Our 2018/19 surplus is relatively small, and the expectations of a deficit the following year are inescapable in light of increasing demand and prices too low to incentivise a further expansion of production," the banks said in its report.
The bank also trimmed its forecast for a global coffee deficit in the current 2017/18 season, mainly because of higher production from Ethiopia and Uganda, as well as lower demand growth than initially expected.
"It has been somewhat surprising to see Ugandan production reacting so strongly to high robusta prices and we pose the question as to whether this performance can be repeated."
The bank's projection of a deficit of 4.1 million bags in the 2017/18 season is revised down from a deficit of 4.9 million bags forecast in October.
Comments
Comments are closed for this article.