Brazil sees coffee crop growing less than expected; deficit looms

Brazil’s government announced Tuesday that farmers in the world’s largest coffee producer will harvest 55.74 million bags of coffee in 2022, a 16.8 percent increase over the previous year but less than market expectations.

Brazil’s coffee production is critical for global supply balance. A smaller-than-average crop could result in a deficit, which would keep coffee prices near their 10-year highs.

Brazil’s food supply agency Conab estimated arabica coffee production at 38.78 million bags, a 23 percent increase over 2021, as the country enters the biennial “on-year” phase of arabica production.

Robusta coffee production increased by 4% to 16.9 million bags.

Total production will remain well below the record set in 2020, the previous “on-year” crop estimated at 63 million bags by Conab.

Despite the projected increase, Conab’s number is lower than the majority of independent estimates.

Rabobank anticipates a total crop of 63.5 million bags, while HedgePoint Global Markets anticipates a crop of 65.8 million bags.

Natalia Gandolphi, a coffee analyst at HedgePoint, said the Conab figure would result in a global arabica deficit of approximately 1 million to 3 million bags and a flat balance, or a global production deficit, considering both arabica and robusta.

“Would be a first for the coffee market in recent years, given that consecutive years of deficit/flat balance have not occurred since 2008-10,” she explained.

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