Crop Revision – 2017/2018

New York, December 5 th 2017

Dear Customers, Suppliers and Friends,

Since January 25th, when we released our first estimate for the 2017/2018 crop, there has been several occasions that we have questioned ourselves regarding the size of the current crop.

Initially we thought the output was going to be higher, given the visually good conditions of healthy trees and the fruits maturing beautifully just before the harvest.
Then the impression turned completely opposite, coffee exchanging hands among farmers, coops, merchants and exporters during the peak of availability, normally from August through November, was signaling that production figures could be even lower than we first thought.

At the end, we understood what had happened. In November 2017, when the “C” market shot up to US$ 179.55 cts/lb with the Brazilian Real trading at R$ 3.50 and local interest rates at double digits, a significant amount of forward business took place, drying some liquidity at the beginning of the crop as producers were focused on meeting their compromises for coffee sold at much higher prices than it was being practiced at the beginning of the crop.

Additionally, we faced issues with the size of the beans. In our regular conversations and reports we had mentioned the difficulty to source and offer coffees with screen 17/18, up to a point that several buyers had no choice but to adapt some of their qualities to 16/17 screen size instead.

Last, but not least, bored-beans in higher than historical average number contributed to sum up the scenario that confirmed our belief that the 17/18 crop is indeed a 49.4 million bags one, divided between 38.8 million bags of arabica and 10.6 million bags of conilon.
Moving forward and looking at the upcoming crop, 2018/2019, we feel that it is premature to estimate it at this stage. Not so much because of the “late” arrival of rains, which created some anxiety but ended up being just fine, but a lot due to the defoliation of arabica trees that apparently was provoked by prolonged hot temperatures in early fall and sequential cold days in late winter of Brazil.

We must say though that while the potential has diminished somehow for arabica, on the other hand, the conilon crop is looking very promising, with a possibility of an anticipated recovery of this variety that might make the final crop number indeed slightly above 60 million bags.

We think it is more appropriate to take a new road trip and make our regular visits during the month of January to then send our forecast of the 2018/2019 crop.

Transitioning into inventories, we had to adjust our numbers, going back to re-consider previous years’ crop and internal consumption, as the availability of “old” coffee all through the new crop surprised us. In this matter, it seems that the reason that brought these “held-back coffees” into the market was the narrow discount among different qualities and a strong internal demand. Local roasters seeking for alternatives in front of another small conilon crop and exporters running to cover their needs created a tight market as producers could not meet the demand quickly enough. Once again, farmers were focused on delivering new crop beans compromised with forward-deals.

In other words, the price difference among low-grade coffees, conilons, “old-coffee”, good cups and fine cups was the tightest we had experienced in more than 60 years of our history, turning attractive for coffee “collectors” to release their stocks of non-fresh beans.

Therefore, as of Jun 30th, 2017, we believe that carry-over inventories were at 2.635 million bags and if we add the 49.4 million bags produced in this cycle, the total availability was at 52.035 million bags. Assuming an internal consumption of 21 million bags and total exports of 30 million bags from July 2017 to June 2018, we estimate that the carry-over as of June 30th of 2018 will be at 1.035 million bags.


Brazilian Stocks, Production and Consumption

Carry-over stocks as of 30-Jun-2017 …………………………………………………… 2,635,000
Crop 2017/2018 ……………………………………………………………………………… 49,400,000

Total Availability as of 30-Jun-2017 ………………………………………………….. 52,035,000

Exports from July to October …………………………………………………………….. (9,648,341)
Exports from November 2017 to June 2018 ……………………………………….. (20,351,659)
Internal Consumption July 2017 to June 2018 ………………………………….. (21,000,000)

Total Disappearance ……………………………………………………………………….. (51,000,000)

Carry-over stocks as of 30-Jun-2018 …………………………………………………….. 1,035,000


*As a reminder carry-over stocks cut date at the end of June does not mean that overall inventories are as low  since the conilon crop arrives before July with fresh coffee available for usage already in May.

This year, 2017, proved to be a challenging one to the coffee chain as a whole, but at the end we all managed to fare through it, keeping up with the hard work, always aiming to maintain a healthy and honest commercial and friendly relationship with our partners.

We take this opportunity to wish you all Happy Holidays and a Healthy and Prosperous 2018!

Best regards from all of us,

Rodrigo Costa, Sergio Hazan, Renata Hazan and Mauricio Dicunto 

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Estimated harvest 2017

Santos, January 25th 2017

 

Dear,

After intense data collection and analysis we feel secure in releasing our final revision for the crop 16/17 and first estimate of the crop 17/18.

Considering that most of the Brazilian states are facing a negative bi-annual year, we expect a drop of approximately 10% comparing to last year’s volume. This evidenced by the general pruning of crops in some regions.

The scenario for Arabica coffees is more comfortable than Conilon. However it doesn’t reflect in an evolution of business in physical market. After two positive Arabica crops, producers find themselves in a very comfortable situation, choosing the right moment to sell their lots. The market remains steady with producers always aiming for the much dreamed level of R$ 500.00 per bags, even up.

A big narrowing of prices noted for lower qualities, with current prices being practically equivalent. When searching at physical market it’s possible to observe Rio, Riado Rio and Harsh coffees being negotiated at very competitive prices. This causes tighter selling diffs, resulting in less competitive low grades. An important point to observe in this matter is the expressive demand for this type of coffee in the Brazilian internal market. This is caused by the scarce offer of Conilon, and when available, expensive prices.

The strong demand by the local industry solidifies the differentials for the lower grade qualities resulting in a negotiation floor with diffs rapidly increasing. This scenario could be repeated in the 17/18 crop, resulting in more vulnerable differentials to drops of the NY and USD market.

The Espirito Santo region is still facing issues related to the two consecutive years of hydric stress, which led to the suspension of the permission to use irrigation. Also, we are still going through uncertainties related to the rain season in Espirito Santo, that received only 10% of the historical volume predicted for Jannuary. There is, however, a better rain forecast for the month of February. And definitely it can change the expected volumes for the 17/18 Conilon crop.

A very richful 2017!

Best,

Comexim

Sergio – Mauricio – Renata.

Brazilian Crop
2016-2017 2017-2018
Minas Gerais 31.300.000 27.250.000
Cerrado 7.500.000 5.500.000
South area 16.500.000 13.250.000
Z.da Mata area and North 7.300.000 8.500.000
Espírito Santo 9.500.000 9.000.000
Arábica 4.000.000 3.000.000
Conillon 5.500.000 6.000.000
São Paulo 6.700.000 5.000.000
Paraná 1.350.000 1.450.000
Bahia 2.500.000 3.300.000
Arábica 1.500.000 1.600.000
Conillon 1.000.000 1.700.000
Rondônia 1.600.000 1.900.000
Arábica 0 0
Conillon 1.600.000 1.900.000
Others 1.600.000 1.500.000
Arábica 1.000.000 800.000
Conillon 600.000 700.000
TOTAL     54.550.000   49.400.000
Arábica 45.550.000 Arábica 38.800.000
Conillon 9.000.000 Conillon 10.600.000
 

 

Other states : MT, MS, PE, RJ, GO, CE, TO and PA

The Zona da Mata area includes 300.000 scs of conillon

 

 Outs Entries  Total
1) Stocks 01/07/2016                  (688.384)
2) Crop 16/17                    54.550.000
3) Green coffee export from 07/2016 to 12/2016                       15.707.718
4) Solubel coffee export from 07/2016 to 12/2016                         2.010.051
5) Internal Consumption from 07/2016 to 12/2016                       10.250.000
Availability 31/12/2016              25.893.847
6) Green Coffee Export Prediction from 01/2017 to 06/2017                       14.000.000
7) Solubel Coffee Export Prediction from 01/2017 to 06/2017                         1.700.000
6) Internal Consumption Prediction from 01/2017 to 06/2017                       10.500.000
Availability 30/06/2017                  (306.153)
 

 

Sources :
2016 Export numbers from Cecafé
2016 Internal consumption  numbers from ABIC
2017 Export Prediction numbers from Comexim
2017 Internal Consumption Prediction  numbers from ABIC

 

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Estimativa de safra 2017

Santos, 25 de Janeiro de 2017

 

Estimados,

Após intensa coleta de dados e análise nos sentimos seguros em divulgar nossa revisão final da safra 2016/2017 e primeira estimativa da safra 2017/2018.

Considerando um ano de bienalidade negativa na maior parte dos estados brasileiros, esperamos uma queda de aproximadamente 10% na safra 2017/2018 em relação aos números do ano passado, evidenciados pelas podas e esqueletamentos nas lavouras em algumas regiões.

Nos cafés Arábica a situação se encontra mais confortável em comparação ao Conilon. Todavia, isso não reflete uma facilidade maior para evolução dos negócios no mercado físico. Após duas safras bastante positivas para o Arábica, os produtores estão bem capitalizados, podendo escolher o melhor momento para entrar no mercado e negociar seus lotes. O mercado se mantém firme com produtores sempre buscando o tão sonhado nível de R$ 500,00 ou mais por saca.

Nota-se um grande estreitamento dos preços para qualidades inferiores; os preços estabelecidos estão praticamente equivalentes. Ao observar o mercado físico é possível encontrar desde cafés Rio e Riado Rio até Duro Riado Rio sendo negociados a preços bem próximos. Isso ocasiona diferenciais de venda mais estreitos, diminuindo a competitividade dos cafés mais fracos. Um ponto importante a ser observado na questão supracitada é a grande demanda por essas qualidades de café por parte da indústria no mercado interno. Isso foi ocasionado devido à escassa oferta do Conilon e também aos altos preços quando disponível. Essa forte demanda por parte da indústria solidifica os diferenciais para essas qualidades mais baixas criando praticamente um piso de negociação com diferenciais subindo rapidamente. Esse cenário deverá se repetir na safra 17/18, fazendo com que os diferenciais fiquem vulneráveis às baixas de NY e U$.

A região do Espírito Santo ainda encontra problemas relacionados aos dois anos consecutivos de stress hídrico, o que ocasionou a suspensão da permissão do uso de irrigação. O local ainda passa por um momento de incertezas com relação às chuvas, que eram previstas para o fim de janeiro, mas o mês recebeu apenas 10% do volume histórico. Existe, porém, uma previsão melhor de chuvas para o mês de fevereiro. O total das chuvas pode acarretar alteração dos volumes previstos para safra a 2017/2018 de Conilon.

Em anexo encontrarão a nossa primeira estimativa da safra 2017/2018, revisão final da safra 2016/2017 e carry over da 2016/2017.

Um 2017 de muito sucesso!

Saudações,

Comexim

Sergio – Mauricio – Renata

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First report 2016 and Carry Over

Dear Sirs,
With the end of the rainy season and with the performance results of the crops, we feel more confident to share our first balance of the 16/17 crop, as well as the last revision of the 15/16 crop.

Yet there is little doubt about the income, the rainy weather during the crop and the anticipation of the harvest, but we can almost guarantee that the numbers reached a reasonable consensus among the Market operators. Apart from the Conilon, that still has some different approach concerning the numbers.

We consider that the rainy weather and the consequent flowering, evolved from reasonable to good in almost all the coffee-growing areas, mainly in the arabic region. The biggest problem was in Espirito Santo, where the region not only suffered with lack of rain, but also have the irrigation permission suspended. The situation has improved since December, but it was already late for the recover of the plantations.

We also hope that finally the percentage of Arabica higher screens on the crop 16/17 return to historical levels or even above average.

It is possible that, depending on the end of the rainy season, the arabic crop would be anticipated.

The internal Market moves slowly, with some reduction in business trades. The strongest producers are keeping the storage of coffee, waiting for the best opportunity to negotiate for a better price.
You will also find some carry over numbers of the end of 2015 and the forecast for the 15/16 crop, in June, 30, 2016.
We can predict that it will be an inter-harvest period with a limited supply of product for the internal Market. The carry over number presents a prediction of 159,000 sacks, a very low number, that can be explained by the anticipation of the 16/17 crop, mainly from Conilon, that will be in the Market by April. Even so, there is the prevision of a strong reduction in the shipments in the first semester of the year.

Find enclosed files.

Good business to all of you.

Mauricio di Cunto and Renata Hazan

See Spreadsheet: Crop 16-17

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Primeiro relatório de 2016

Caros senhores,

 

Com as chuvas e o desenvolvimento das lavouras já consolidados, nos sentimos mais confiantes  em divulgar a nossa primeira estimativa da safra 16/17, bem como a última revisão da safra 15/16.

Ainda restam algumas dúvidas quanto à renda, chuvas na colheita e antecipação, ou não, do início da colheita, mas podemos opinar que os números já têm um consenso razoável entre os operadores de mercado. Isso com exceção do Conilon, que ainda tem alguma divergência quanto aos números.

Consideramos que as chuvas e o conseqüente pegamento da florada evoluíram de razoável para bom em quase todas as regiões cafeeiras, principalmente as regiões de arábica. O maior problema que tivemos foi no Espírito Santo, que sofreu com a falta de chuvas, tendo inclusive suspendido as permissões de irrigação. O quadro melhorou desde dezembro, mas já era tarde para a recuperação das lavouras.

Nós também esperamos que, finalmente os percentuais de peneiras de arábica da safra 16/17 voltem aos níveis históricos ou, até mesmo, acima do normal.

É bem possível que o início da colheita do arábica seja antecipado,  dependendo ainda do final do período de chuvas.

O mercado interno segue em ritmo mais lento, apresentando redução nos negócios. Os produtores mais fortes estão segurando o café restante aguardando a oportunidade de negociar preços melhores.

Seguem também números de carry over final do ano 2015 e previsão para o final da safra 15/16, em 30 de junho de 2016.

Podemos prever que será uma entressafra com pouca oferta de produto no mercado interno. O carry over apresenta uma previsão de 159 mil sacas, um baixo volume, que é explicado pela entrada antecipada da safra 16/17, principalmente do conilon, que começará  ir para o mercado em abril. Mesmo assim há previsão de uma forte redução no volume de embarques nesse primeiro semestre do ano.

 

Seguem anexos.

 

Bons negócios a todos.

Sergio Hazan, Mauricio di Cunto e Renata Hazan

Ver planilha: Crop 16-17

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