Brazilian coffee export revenue increased by 28.2pc in January-June over the same period in 2019, thanks in part to a weaker Brazilian real that has made its commodities more competitive.
Coffee sales volumes increased by just 0.3pc in the first half of 2020, however, according to data from Brazilian Council Exporters of Coffee (Cecafé).
The Brazilian exports were also helped by a decline in production in Vietnam, where lower rainfall and higher-than-average temperatures triggered concerns about reduced production on lower yields. TheUS Department of Agriculture (USDA) forecasts Vietnam’s marketing year 2020/21 coffee production at 30.2mn 60kg bags, down 3.5pc from the previous year.
Brazil’s robusta coffee production — which is considered a lower-quality grain than arabica — filled the gap in the global market left by Vietnam, with robusta grain exports up by 30pc in January-June, according to Cecafé data. Total exports, which includes industrialized coffee and arabica production, decreased by 4pc in the same period.
Robusta grain coffee, which is only used in certain blends in the US and other small niche markets, has recently found new markets, including first-time importers such as Spain, Russia and some African countries.
Brazil produced 59.3mn bags of coffee through June 2020, according to USDA data. For the next season the forecast is for a record of 67.9mn bags. Good weather conditions have generally prevailed in most Brazilian coffee regions, supporting fruit setting, development and filling, thus resulting in higher likely yields.
The exports should continue to be helped by Brazilian currency depreciation. Since January, the Brazilian real fell by 28.6pc against the US dollar, and domestic macroeconomic problems caused by the Covid-19 pandemic should continue to affect the currency.
But there are concerns about US demand. The US was the biggest Brazilian coffee buyer in the first six months of the year, with almost 20pc of market share. The economic situation in the US may lead to reduced coffee purchases, however.
Prices in the domestic market remained steady this year as demand for exports has grown. Brazil’s domestic coffee consumption for 2020/21 is expected to be unchanged at 23.5mn bags — 22.4mn bags of roast/ground and 1.2mn bags of soluble coffee — compared to the previous market year. Despite the projected decrease in the Brazilian GDP for 2020, coffee has high penetration in Brazilian households, with about 97pc of Brazilian households drinking coffee regularly, according to the Brazilian Coffee Industry Association (Abic). The association expects the increase in consumption in the Brazilian households should offset the losses in “out of home” consumption with the temporary closure of Brazilian coffee shops, hotels, bars and restaurants imposed by the pandemic.
SOURCE: Argus media
