Brazil’s coffee exports will fall this season to a five-year low, sapped by a disappointing harvest and a quest to rebuild inventories which had shrunk to their lowest since at least the 1950s, US officials said.

The US Department of Agriculture, in a much-anticipated twice-yearly briefing on global coffee supply and demand, cut by 2.40m bags to 36.65m bags its forecast for Brazilian shipments in 2022-23.

The downgrade, reflecting weakened expectations for volumes of both beans and soluble coffee, reduced the estimate for exports from the world’s top coffee producer and shipper looking to the lowest since 2017-18, a season marred by a third successive drought-reduced robusta harvest.

The forecast – made on the July-to-June basis which Brazil itself follows – implies further weakness ahead for shipments, which up to November at reached 16.05m bags, up by 1.7% year on year, according to data from exporters’ group Cecafe.

In 2017-18, cumulative shipments for the July-to-November period totalled 12.80m bags.

‘Well below recent on-year crops’

The USDA’s revision came as it cut by 1.70m bags to 39.80m bags its estimate for Brazil’s 2022-23 production of arabica coffee, for which the season is an “on year” in the country’s cycle of alternate higher and lower producing years.

While above the 36.40m bags produced last season, when arabica plantations were hit by drought and frost, the 2022-23 estimate “is well below recent on-year crops that peaked at nearly 50m bags”, the USDA said.

“Arabica trees in many growing regions continued to recover from severe frosts in June and July 2021 as well as high temperatures and below-average rainfall that prevailed until September 2021.”

The estimate for Brazil’s robusta coffee production was maintained at a record 22.80m bags, “as favourable weather conditions and good crop management aided fruit settings and development in the main growing region of Espirito Santo”.

Thin stocks

The revisions left Brazil’s total coffee output pegged at 62.60m bags, well behind the record of 69.90m bags set in 2020-21, although above the 58.10m bags recorded in last season when frost and drought damage exacerbated the “off-year” effect.

“Output gains are expected to rebuild stocks” rather than boost exports, the USDA said, estimating Brazil’s inventories at the close of 2021-22 at just 540,000 bags – a drop of 88% year on year, and by far the lowest on data going back to 1960-61.

The forecast for shipments from Vietnam, the second-ranked coffee producer and exporter, was cut too by 450,000 bags to 27.65m bags, reflecting a hit to yield prospects from plantation scrimping on high-priced fertilizers.

The USDA, reporting that Vietnamese “fertilizer prices skyrocketed as much as 70% in the last year, said that “farmers responded by reducing fertilizer use which is expected to lower yields and output from the previous year”.

The ongoing harvest, mainly of robusta beans, was pegged at 30.22m bags – a downgrade of 680,000 bags from the previous forecast, and down by 1.36m bags year on year.

‘Improving supply situation’

While expectations for India’s exports were raised by 250,000 bags to 6.22m bags, on a higher production estimate, and the Indonesian export forecast nudged higher too, the USDA downgraded its forecast for global shipments in 2022-23 by 2.31m bags to a three-year low of 139.3m bags.

However, with demand hopes reduced too in the face of world economic growth concerns – the forecast for growth in world consumption this season cut from 1.8m bags to less than 800,000 bags – the USDA forecast some rebuild in world coffee stocks this season.

“Ending stocks are expected 1.5m bags higher [year on year] to 34.1m.

“Against this backdrop of an improving supply situation, coffee prices as measured by the International Coffee Organization monthly composite price index have dropped over 25% since February.”