May 2013 C&CI • Brazil • 25
However, given the surprisingly slow export pace some traders and analysts are starting to ask if this, rather than a massive build-up in stocks in Brazil, reflects the fact that the 2012-2013 harvest was not as big as many people believed.
“The Brazilians are well financed, we know that, but to hold on to well over 4 million bags, or even 6 million bags, seems a pretty far stretch,” said an analyst with a large trading house in the US. “Even if financing is available in Brazil, and even if private producers are able to hold on to some bags and gamble on better prices, holding on to more than 3-4 million bags is just too expensive. Not even the best- financed exporter can afford to do that,” he said.
Another exporter in Brazil mentioned the example of Cooxupe, the world’s biggest co-operative, based in the Southern Minas town of Guaxupe, which recently completed construction of the biggest warehouse in Brazil, with storage capacity of up to 1.4 million bags.
“It’s only Cooxupe that has anything
remotely close to this size storage facility, and even at Cooxupe you don’t see the warehouses full of coffee, on the contrary, there really is not that much coffee around. Even if financing is available, no exporter or private producer is so well off that they can hold on to that much coffee. Considering how slow the exports have been, if Brazil produced as much as 55 or 56 million bags, where is all that coffee?” he asked.
Under-estimates
and over-estimates Other Brazilian sources agree, and say that while it is widely believed that CONAB always under-estimates the size of the crop, the market loves to over-estimate the size of the Brazilian crop, especially given the short positions in the market which, for most of the period since mid-November, stood at close to 24,000 positions, or the equivalent of about 6.8 million bags. Brazilian consumption, meanwhile, continues to take up a growing share
of the harvest, with the USDA saying it expects growth in the 2012-2013 crop to rise an impressive 3.9 per cent, up to 20.76 million bags in the current cycle, from 19.98 million bags in the 2011-2012 harvest year.
Low prices are also seen as
supporting sustained growth in domestic consumption for the foreseeable future ahead. “With global coffee consumption rising 1.5-2.0 per cent per year, supply shocks remain the biggest risk to coffee prices. It is worth noting that Brazilian coffee consumption is rising 3.0-3.5 per cent per year, but much of that increase is attributed to domestic consumption of lower-grade coffee,” said Societe Generale, adding that “another risk to our longer-term forecasts is a shift to premium coffees for Brazilian consumers, particularly if prices remain depressed and this encourages more consumption.” In typical Brazilian fashion, the only thing that everybody agrees about is that 2013- 2014 will be another interesting year. C&CI
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