Bloomberg News

Volcafe Says Coffee Supply to Exceed Consumption for Second Year

August 30, 2013

Global coffee supplies will outpace demand for a second year in the 2013-14 season that starts in October in most countries because of ample availability of arabica, according to Volcafe Ltd.

Coffee production will be 3.8 million bags higher than consumption in 2013-14, the Winterthur, Switzerland-based coffee unit of commodities trader ED&F Man Holdings Ltd. said in a report today. That follows a surplus of 8.2 million bags this year. Volcafe estimates that supply beat demand by 200,000 bags in 2011-12, which it deems a balanced market. A bag of coffee usually weighs 60 kilograms (132 pounds).

Arabica coffee futures on ICE Futures U.S. in New York fell 19 percent in 2013 and are heading for a third year of declines, the longest slump since 1993. Brazil, the world’s largest coffee producer, will harvest 57.2 million bags in 2013-14 compared with 56.8 million bags in 2012-13 and 48 million bags a year earlier, Volcafe estimates.

“Arabica is moving into the second season of surplus, with the prospect of a third to come,” Volcafe said in the report. “Robusta, on the scale of things, is still balanced.”

The 2013-14 excess supplies of arabica coffee will amount to 3 million bags, the robusta surplus will be 800,000 bags, the trader estimates.

Robusta beans fell 7.5 percent on NYSE Liffe in London this year after rising 6.3 percent last year. The price difference between the two varieties fell to 36 cents a pound from an all-time high of $1.89 in May 2011.

Consumption of arabica coffee, the type favored for specialty drinks such as those made by Starbucks Corp. (SBUX:US), will rise by 4 percent in 2013-14 after growing 1 percent in the current season and falling 5 percent in 2011-12, data from the trader showed. Demand for robusta beans, used to make instant coffee, will rise 3 percent after jumping 6 percent this year and 15 percent in 2011-12, Volcafe estimates.

Brazil’s Harvest

While frost in Brazil’s Parana state cut 500,000 bags of production potential for the 2014-15 crop, the country could still harvest more than 60 million bags, according to the report.

“New productive tissue in the main coffee areas was very good, as observed in our last field survey,” Volcafe said. “The July frost in Parana has reduced some productive potential, and there is a whole flowering season to get through, but the odds of a record 2014-15 Brazil crop are good.”

Farmers in Vietnam, the world’s top producer of the robusta variety, will reap a record 30 million bags in 2013-14, Volcafe estimates. That’s up from 26 million bags in 2012-13.

“Rainfall has been above average, and the usual exceptional husbandry and inputs have been applied,” Volcafe said. “Area is being renovated and is expanding. The price of robusta is trading well above cost of production.”

Robusta Production

In Indonesia, the third-biggest robusta grower, production for the 2013-14 season is estimated at 10.5 million bags, down about 12 percent from a year earlier, according to the report. Output in Colombia, the second-biggest arabica producer, will rise 1 million bags to 9.5 million bags in the period.

Strong monsoon rainfall in India will cut production to 5.3 million bags in 2013-14 from 5.7 million bags a year earlier, the trader estimates. Excess moisture has “negatively affected” both the arabica and the robusta crops.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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