Marex Specrton, a leading global commodities broker, is expecting the global coffee production to perform below demand by 3.0m 60-kg bags next season, because of a slowdown in production from the top exporter Brazil.
Marex stated that “Already at this very early stage, it is probable that there will be a fourth deficit and possibly a large fourth deficit,” the expected drop is to around 5m ball in the Brazilian production.
Coffee has a biennial cycle, which means that years alternate between great and not-so-great harvest. This year marks a bad weather for the robusta crop in Espirito Santo, Brazil which is expected to continue for the rest of the season.
On the brighter side, a larger harvest is anticipated from Vietnam exports, which is the second largest coffee producer and exporter in the world. The crop has been on the rise by 3.5m bags, to 28.0m bags.
Marex released another statement that the 2017 – 2018 will be an on-cycle for Vietnam and prices will provide a huge capital potential for the country.
Marex also said that because of the prospect of a heavy coffee production stocks from Vietnam that market might have just bitten of more than it can chew and is now pressured to deliver the futures contract.
Brazil has a shortage of robusta, due to the prolonged dry weather and markets are waiting to see if Brazil will allow the import of robusta to ease the tension in the domestic market, especially for instant coffee production.