ECOM 

Monthly Report

World Fundamentals  April  2019  
 Main Points

 World S&D: the world supply and demand had little change in April; a slight downward revision in
production and a slight upward revision in demand.

 The current deficit for the 19/20 year is 2 mio bags. Keep in mind we are projecting that the
Vietnam crop will be about 30 mio bags also we expect to see a higher production in Conillons. Its
likely there will be a Robusta surplus in an overall deficit year. This means the Arabica deficit is larger
than 2 mio bags and is likely closer to 4-5 mio bags.

 Weather and farmer inputs which are affected by low prices will impact yields and lead to changes
in production.

 Looking Ahead. The guestimate for the 20/21 crop will be a slight surplus due to an upcycle in Brazil
Arabicas. Initial talk is for 20/21 Brazil crop is around 70 mio bags.
World Coffee Production: 17/18  and 18/19

Country
2017/18 2018/19

Brazil 50,900,000 65,200,000

Vietnam 32,300,000 27,500,000

Colombia 13,800,000 14,300,000

Indonesia 11,800,000 12,300,000

Honduras 7,570,000 7,000,000

Others 42,830,000 43,200,000

Total 159,200,000 169,500,000

 World Production and Demand

175.0
169.5

165.0
165.0
159.8 159.2

155.0 153.7
152.3 151.8
150.8

144.1
145.0
138.9 139.1
136.1
135.0

126.2
125.0

118.6

115.0 112.9

105.0
0506 0607 0708 0809 0910 1011 1112 1213 1314 1415 1516 16/17 17/18 18/19 1920

Production Demand
 Brazil

Brazil farmers have sold about 85-90 % of Conillon crop and about 80-85 % of the Arabica crop. Sales for
the 19/20 crop for Conillons and Arabicas running around 20-25 %.

 Demand: no one expected to see “so much” Brazil Arabica coffee absorbed by the market. Demand is
outstanding. This is due to good relative value brought on by a large crop and a devaluing currency.
Also, the quality of this current crop is above average. The narrower arbitrage this year has also made
Brazils attractive vs Robustas.

 2019/20 harvest - the next crop is already arriving. The crop is early. Some areas in South Minas
beans are mature and ready to be harvested. In SM more than 70% of the farms have started
harvesting and around 10% of the coffee is already harvested. Have the impression that the uneven
maturation seems less severe now comparing with a couple of months ago. The overall picture from
SM is very good for this year and tree conditions are impressive.

 Local Factors: The Real is weak hovering around 3,90 / 4,00 per U$. The current Government team
is at odds with Parliament and there is no optimism for improving investments in our Economy.
 Colombia

Colombia: farmers have sold about 65 % of the 2018/19 crop.

 Exports Oct 17 - April 2018 were 8 mio bags. This year exports are stronger – 8.2 mio bags.
Expect exports Oct – Sept 2019 =13.8 mio ( 0.8 mio more than the previous year.)

 Production: our latest estimates are 18/19 -14.3 mm bags and 19/20 14.5 mio

 Supply Side: As usual, coffee started flowing after Easter, and with every small rally of the market,
producers do not hesitate to sell, supported by a devalued currency and a strong basis. We are not
expecting differentials to correct as most of the exporters stocks are at a minimum and competition
from Central America is decreasing. The FNC's tone has started to change; nevertheless, their
negativism for the last three months has created a very pessimistic mood among producers. Honestly,
prices are decent enough for a good producer to make a living and a decent margin.

 Exporters are paying an average 730.000 COP per carga. Since the FNC published price has been
kept close to 685.000 COP, producers are entitled to receive the maximum subsidy which is 30.000
COP (5 cents/lb). This on top of the price received from exporters. Nariño, Tolima and Cauca crops
are showing an important recovery and are expected to have an increase of 10% to 20% depending
on the region. The Coffee axis fly crop is better too.

 Maincrop flowering for 19/20 was very good, but we had too much rain in April with little sunshine.
This will definitely affect the potential for the maincrop, which despite this will be bigger than the
previous year.
 Colombia

Colombia continued:

 Demand : Demand is decent. Spot coffee in USA and Europe are enjoying a surge of demand , xw
prices continue to firm.

 Other news: - As we mentioned in our last report limitations on imports had been brought to the table
by the government as a measure to support local prices. At the end of April a new decree was issued
forbidding imports of coffee with moisture levels higher than 9%.

 Colombia imported more than 200.000 bags last February showing the degree to which local
roasters depend on Brazilian coffee imports. Low grades of Colombian Coffee are still in tight
supply causing roasters to despair.

 COP/USD in a range between 3200/3280. This causes uncertainty among potential investors in the
country, and keeps the door open for the extreme left to win the next presidential election in 3 years.
 Central Milds

Honduras: farmers in Honduras are about 90- 95 % sold.

 Exports Exports this crop year = 6.5 mio vs 7.2 mio bags last year, Exports Oct – April in 2018/19 =
3.8 mio bags vs 4.2 mio last year.

 Production : 18/19 production = 7 mio bags, and 19/20 crop around 5.8 mio bags. Expect further
revisions of this early estimate.

 Local market. Very good flowering in all producing areas but adequate fertilization will be required,
which is in doubt due to the lack of liquidity. Interest in physical is mostly for inferiors, other demand for
18/19 is drying out.

Nicaragua: Production forecasts - 18-19: 2.25 mio and 19-20: 1.90 mio

 Exports, 18-19 Oct-March = 0.8 mio , (-21% less in comparison to 17/18 crop)

 Nicaraguan exports are still flowing as we enter our busiest months (May, June, July), the national
political crisis hasn't affected this sector. Imports into the country remain very limited due to the good
production of this year.
 Central Milds

Costa Rica: farmers in Costa Rica are about 98% sold.

 Exports. Will be low , limited by a disappointing crop.

 Production : 18/19 the lowest crop in the last 42 years in Costa Rica, with 1.27 mio

 There is not much available coffee to sell of this crop. In general, quality was good and yields cherry-
to-green between the average of last crops

 For new crop, waiting for rains in The West valley. Farmers are worried due to the dry stress. There is
risk of yield loss if there are not rains in the next 10 days. It is early for estimate crop 19-20. Internally,
we see good flowerings (except west valley) so we expect 10% more coffee than crop 18-19.

 Mills are speeding up the sales for new crop. Most of the coffee offered at flat prices.

Mexico: Our current figures are: Crop 18-19= 3.25 mio including Robs 0.46 mio and Crop 19-20 = 3.51
Mio including also Robs 0.50 Mio.

 Exports for Oct - Feb 2018 are 1.3 Mio bags vs. Oct - Feb - 2019 = 1.14, so 12.30% lower.

 We can see very limited volumes for offer in general in high qualities, crop is practically over with 10%
down volume, diffs firming up every week.
 Vietnam

Vietnam : farmers are 60-65 % sold for the 18/19 crop ( last year they were about 70 % sold)

 Production for the 2018/19 crop has been revised downward, this now stands at 27.5 mio bags – We
estimate the next crop will be bigger than the current one, about 30.3 mio bags (+10%). Let's be
careful because the development of El Nino can badly impact this number.

 Weather: From the beginning of the year, the weather is drier than usual. Rainfall is normal, although
temperatures are abnormally high. In April, Vietnam observed its highest temperature ever recorded.
Because of this, the evaporation is very quick. Moreover there is a lack of irrigation. It's still early to be
sure that it will impact the next crop.

 Exports: The Viet exports in April decreased by 13.5% compare to last year at the same period. 2,1
mio bags in April and a total of 14.5 mio bags (-8% compare to the previous year) from the beginning
of the crop have been exported.

 The local market . The local prices have become very low and the farmers release their coffee very
slowly. The small incomes they got this year will impact their future investments. The most worrying is
tales bankruptcies. At the moment everyone is discrete about this but the stop loss levels are coming
and most of the suppliers try to pay to reduce them as much as they can.

 Concerning the diffs they are still increasing because of the shortage of coffee, especially G2.
Grade 3 offers are still non-existent.

 Quality. – The farmers are still holding the coffee, if they don't release it soon, they will keep it until
next crop and blend it. Indeed because of this, the quality of the next crop could be impacted.
 African Arabicas

Ethiopia: 18/19 Crop Estimate: 6.53M Bags (+0.90M YOY), 19/20 Crop Estimate: 6.88M Bags

 Ethiopia exported 200K bags in Feb 2019, 100K bags less than in the previous Feb. Oct-Feb 18/19
exports stand at 1.19M bags, 110K bags less than in the first five months of the 17/18 crop year.

 A low New York futures market and a strong domestic currency make Ethiopian Natural differentials
unattractive. The competition is the domestic market. The situation has not changed much over the
past months and continues to slow the pace of Ethiopian exports. Export offers remain below
replacement prices for both Washed and Naturals. Lekempti seems to be adjusting better in differential
terms in a downward futures market, reflecting a good crop in the West

Kenya: 18/19 Crop Estimate: 750K Bags, 19/20 Crop Estimate: 700K Bags

 The Kenya Main Crop is coming to an end. Prices are depressed due to low quality as the season
closes. Flowering of Main Crop has been dealt a blow. Logistics out of Mombasa remain good.
 African Arabicas

Tanzania: 18/19 Crop Estimate: 1M Bags, 19/20 Crop Estimate: 833K Bags

 2018/2019 Tanzania Season has come to an end. New Crop Cherry picking has commenced in
Kigoma and Mbinga while Mbeya is expected to start in June. Newly released regulations allow
regional auctions. AMCOs can choose to sell green beans at either regional auctions or at the Central
Auction in Moshi. Direct Exports are still permitted; AMCOS can finalize contracts with overseas
buyers. Logistics out of Dar Es Salaam remain slow.

Rwanda: 18/19 Crop Estimate: 420K Bags, 19/20 Crop Estimate: 420K Bags

 Cherry Picking is on ongoing and 19/20 crop coffees to be ready for export in July. About 100K bags
of 18/19 crop remain to be sold.
 Asian Arabicas

Indo Arabica: 18/19 Crop Estimate: 1.13M Bags, 19/20 Crop Estimate: 1.19M Bags

 In March 19, Medan exported 76,214 bags compared to 73,893 in March 18.

 Medan is in peak season with favorable weather for processing coffee. The harvest is expected to be
completed by mid-June. Decreasing internal coffee prices are causing middlemen to hold on to stocks.
Unofficial presidential election results showed that the incumbent president has won, with markets are
responding positively to the news. The president's plan to move the Capital out of Java has no
significant economic impact yet.

PNG: 18/19 Crop Estimate: 925K Bags (+14% YOY), 19/20 Crop Estimate: 850K Bags

 868K bags exported during 2018, compared to 794K bags in 2017. Jan to Feb 19 PNG exported
90,297 bags, 64% higher compared to the same period in 2018.

 Vote of no Confidence to current government is in July. The Kina has depreciated against the US
dollar from US$0.3095 at the end of December 2017, to US$0.2960 in April 2019, mainly due to high
import orders. The very poor state of national and provincial roads is affecting the transport of cash
crops and vegetables to the main towns. It is now a six hour drive from Goroka to Lae by car, 50%
longer than in the 90s.