Brazil’s 2020 record coffee crop favors stock recovery

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BBrazil’s 2020 crop coffee crop was revised upwards by Safras and reached 69.50 million bags, reaffirming this year’s production. The large volume helps to replenish the level of stocks, after ending the 19/20 business season at only 1.69 million bags. The dollar surge over the first half of 2020 raised selling interest and boosted exports. As a result, shipments hit 40.31 million bags between Jul/2019 and Jun/2020, absorbing the physical availability and drastically reducing stocks. Highlight on conillon sales, especially in the transition between the business seasons.

These low stocks combined with the record production reaped this year guarantee a supply of 71.19 million bags for the 20/21 season. The preliminary projection is that domestic consumption will recover and grow by 2.6%, reaching 24 million bags. The optimistic scenario is linked to the advance of vaccination and the resumption of economic activity. Total exports, on the other hand, must surpass the level of 42 million bags, setting a new record. The accelerated sales flow and the high commitment on the part of growers support this external perspective.

However, even with the strong external flow and the increase in domestic demand, the year will recover stocks, projected at 4.94 million bags for the end of June 2021. This would bring the stock-consumption ratio to 21%. Despite the increase, stocks must still be the lowest since the 15/16 season, except for the atypical 19/20 year. And this is an important piece of information, since it is already speculated there may be sharp losses in Brazil’s 2021 crop. Safras points to a 30% decline in arabica and 18% in total, which would bring the national production to only 57.10 million bags.