Low Brazil crop to drive Robusta deficit in 2016/17: Rabobank

The global coffee supply/demand balance will see a deficit in Robusta and a surplus in Arabica for the 2016/17 crop year, according to Rabobank’s first quarter Commodity Market Report for the coffee industry.

Overall, Dutch bank Rabobank is forecasting a small global deficit of 0.7 million bags for the coming crop year. This is a reduction on the bank’s previous forecast of a 3.7-million bag surplus, and comes on the back of lower-than-expected yields out of Brazil.

The report states that Arabica is now forecast to have a 2.6 million-bag surplus, down from an earlier estimate of 5.5 million bags.

However, the drop in Brazil’s Robusta production to 12.6 million bags, 4.4 million bags below the country’s four-year average, is the main driver behind the predicted deficit of 3.3 million bags in the Robusta crop for the year, the report says. Rabobank goes on to warn that further problems could loom for Robusta markets if rains do not return to Vietnam’s coffee-growing areas in the next two to five weeks.

Rabobank predicts that this deficit will see Robusta prices climbing in the coming months, going beyond the US$1560 per tonne that it reached on 12 April.

“We believe that the low Brazil robusta crop – together with a lower Indonesian crop – should create a tight market in the next nine months,” the report stated.

Brazil’s 2016/17 Arabica production however, is on the incline to an estimated 40 million bags thanks to strong rainfall throughout March in more Arabica-producing areas.

According to the quarterly report, Ethiopia is suffering the effects of the 2015 drought, one of the worst in 50 years. It’s impact on the next crop remains unclear as only marginal coffee areas are affected, however the International Coffee Organization says its export outlook remains strong, with exports from October to February 30 per cent higher at 1.01 million bags, compared to 0.78 million bags exported the year prior.

Despite Colombia’s dry weather, Rabobank says there’s little evidence to suggest its having an effect on crop production, with exports expected at 13.7 million bags in crop cycle 2015/16, up from the 0.6 million bags from Rabobank’s November estimate.

Overall, the report estimates global production is up to 150.8 million bags for the 2015/16 crop year. As a result, the 2015/16 supply and demand deficit has reduced to 1.2 million bags compared to an earlier predicted 2.7 million bags.

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