Brazil’s coffee exports will recover modestly next season, in part at the expense of Vietnam, as roasters roll back on a trend of replacing high-priced arabica beans with robusta ones.

While arabica and robusta coffee are typically only interchangeable to a limited amount, thanks to taste and quality differences, strong price differentials after a poor 2021 harvest in top arabica-grower Brazil – with Colombia and Honduras output crimped by weather too – encouraged enhanced switching.

“High prices of arabica resulted in robusta being added more generously into roasted blends, driving up demands” this season for robusta from Vietnam, the top producer of the variety, the US Department of Agriculture’s Hanoi bureau said.

Arabusta spread

The jump in arabica values pushed them to unusually high premiums over robusta, which averaged 144.80 cents a pound in February on futures markets, up 117% year on year, according to the International Coffee Organization.

The premium of Brazilian natural arabica beans over robustas, at 135.61 cents a pound in February, was up 190% year on year, and at its highest in a decade, ICO data show.

However, the premium of Brazilian natural beans has narrowed since to average 114.74 cents a pound last month, sapped in part the prospect of an improved Brazilian harvest ahead for 2022 – an “on-year” in the country’s cycle of alternate higher arabica-producing years.

In the South American country, “most of the [arabica] producing areas are in the on-year of the biennial production cycle and rainfall volumes have been mostly favourable in all growing regions as of October, supporting the development and filling of the fruits,” the USDA’s Sao Paulo bureau said.

‘Currency dynamics’

Foreign exchange markets have also moved in favour of Brazilian exporters.

“While the Vietnamese dong has been stable, the Brazilian real recently weakened,” the Hanoi bureau said.

“As Brazil will start their harvest of an on-year crop soon, these currency dynamics could prompt Brazil to sell more in the coming months, competing with Vietnam robusta in 2022-23.”

Vietnam will also face enhanced rivalry from Indonesia, a major robusta grower, where “coffee traders noted that the upcoming Indonesia coffee crop is developing well and offers for delivery in 2022 are currently competitive”.

Vietnam’s coffee exports will erode by 350,000 bags year on year to 26.65m bags, albeit in a year when output will fall too, by 650,000 bags to 30.93m bags.

Arabica vs robusta

Brazil’s coffee shipments, by contrast, will recover by more than 1.0m bags to 39.05m bags, the Sao Paulo bureau said, noting the boost to the country’s export competitiveness from “the depreciated local currency”.

Volumes will be supported too by the prospect of the on-year arabica crop, forecast up 5.10m bags year on year at 41.50m bags – if still more than 8.0m bags below the record set two years ago, a reflection of tree damage from frost.

“Weather-related issues in some areas such as below-average rainfall that prevailed until September and the severe frosts in June/July 2021 have affected arabica coffee trees’ first blossoming and fruit setting, thus reducing the production potential for the upcoming crop.”

Brazil’s robusta crop will expand by 1.10m bags to 22.80m bags, setting a record high for a fifth successive year.

“Above-average weather conditions and good crop management resulted in good blossoming and fruit setting in most [robusta] coffee fields.”

‘Burgeoning experiment’

The briefings also noted the continued challenge to exporters presented by the logistical crisis, which had prompted merchants in both countries to switch trade to bulk vessels, where capacity has been less disrupted, from container ships.

In Brazil, “earlier this year, the first break-bulk vessels left the Port of Santos, shipping 108,000 bags of coffee to Europe,” the Sao Paulo bureau said.

“The ship is part of a burgeoning experiment in the industry where producers, roasters and traders are looking to leap-frog the global container shortage that is causing an unprecedented backlog of shipments.”

The Hanoi bureau reported too that traders had started to ship coffee from Vietnam to Europe in bulk vessels, adding that “the amount of bulk shipment could reach 5,000-12,000 tonnes each sailing.

It added that “coffee traders reported that average shipping costs in March were still nearly double the costs of the same period last year, although they slightly reduced from the past year’s peak.

“Spot container freights to Europe are currently declining, supporting exports, while those to the United States are still at high level.”