This month’s Origin Report returns its focus to Brazil as the country’s harvest has wrapped up and coffee year 2021/22 winds down. Total production in the country is slightly lower than projected, though conditions have been favorable for high quality lots from many of the country’s growing regions. Internationally, the C Market has shown high volatility again, the ICO Composite Indicator Price is rising, and certified coffee inventories continue to dwindle. Read on for details about this year’s harvest in Brazil, a closer look at the international markets, and updates from our Brazilian office.
The World Market
Source: TradingviewAfter a relatively stable period from mid-July to Mid-August when the market traded in an ascending channel between $2.05–2.25, we saw renewed volatility last month with a rapid $0.27 price increase over three days from August 22–24. This spike was followed by a long and steady decrease in prices back to the level of $2.14/lb, approximately the same price as before the spike. During this decrease over the 15 trading days between August 26 and September 16, we only saw four days with price gains and eleven with losses. The decrease did not continue to the lower support levels of $2.05 and much less the lowest recent price of $1.95 seen on July 14. As of September 30, the market has been trading in an ascending pattern again between the $2.10 and $2.30 levels.
Global Coffee Industry Statistics
Source: ICO Coffee Market Report, August 2022
- The ICO Composite Indicator Price (I-CIP) gained 4.9% from July to August 2022, averaging 200.11 US cents/lb. The biggest movers were Robustas, up 9.2% and the largest decrease was seen in Colombian Milds, down 9.7%.
- Global exports of green beans in July 2022 totalled 9.04 million bags, compared with 9.91 million bags in the same month of the previous year, down 8.8%. The lower volumes were spread across all four groups of coffee, with Colombian Milds recording the biggest drop, falling by 12.5% year-on-year. This double-digit decrease in July pushed the cumulative total exports of green beans for coffee year 2021/22 below the totals seen over the same period of the previous year, down 0.8% for the year as compared to 0.1% cumulative increase seen during the first nine months of the current coffee year. The export total for 2021/22 through July is 98.08 million bags as compared with 98.97 million bags over the same period a year ago.
- The latest provisional outlook for total production in coffee year 2021/22 remains unchanged at 167.2 million bags, a 2.1% decrease as compared to 170.83 million bags in the previous coffee year. World coffee consumption is projected to grow by 3.3% to 170.3 million 60-kg bags in 2021/22 as compared to 164.9 million for coffee year 2020/21. In 2021/22, consumption is expected to exceed production by 3.1 million bags.
- The New York certified stocks decreased 6.5% from the previous month, closing in at 0.72 million bags—the lowest in over 20 years—while certified stocks of Robusta coffee reached 1.61 million bags, representing a decrease of 10.9%
This section was sourced from the ICO unless otherwise indicated. Read the ICO’s full August 2022 report here.
Harvest in Numbers and Statistics
Now that the Brazilian crop of 2022/2023 is fully harvested we can review some of the data provided by Cecafé, the Council of Coffee Exporters of Brazil. This harvest yielded 60.51 million bags in total, of which 39.17 million bags were Arabica and 21.34 million were Robusta. This is slightly lower than the 62–64 million bags that were initially projected. The decrease is felt almost exclusively in Arabica production, which has left producers struggling to fulfill forward contracts negotiated in past years. This in turn has decreased the expected supply of coffee, leading to an increase in the differential pricing across all qualities. Notably, coffee for local consumption in Brazil has seen a very strong increase in prices, almost doubling in the last year as shown in the table below.
With a domestic consumption of approximately 22.51 million bags, the Brazilian market remains very significant for Brazilian coffee producers. Nevertheless, coffee exports remain very valuable to the Brazilian coffee industry. According to the monthly statistical report of Cecafé, revenue from Brazilian coffee shipments reached a historic record of $5.9 billion USD from January to the end of August this year, which represents a growth of 61.4% compared to the $3.6 billion USD registered in the first eight months of 2021. On the other hand, the volume dropped 5.3% during that time frame, down from 26.7 million bags of 60 kg to the current 25.3 million bags at the end of August.
Future Outlook for Ally Coffee in Brazil
A smaller harvest in Brazil has given producers one advantage this year, which is the ability to focus more closely on the quality of their crop. With less coffee to harvest, process, and mill, more attention can be paid to each stage of production. Weather conditions have also been favorable recently, contributing to these benefits. All in all the year looks promising for quality, which is something that our Brazil Green Coffee Buyer Amanda Oliveira has noticed on the cupping table.
Coffee trees at Simone Carneiro de Morais Sousa's Fazenda Santa Quitéria in Mantiqueira de Minas, Brazil
Brazil continues to see the emergence of new coffee competitions among farms and producers as the demand for quality grows in both international and domestic markets. With the support of Grupo Montesanto Tavares, our sister company Cafebras is organizing a competition called ‘’Campeōs Das Origens Brasileras." In this competition, producers from Alta Mogiana, Cerrado Mineiro, Chapada de Minas, Espírito Santo, Matas de Minas and Sul de Minas can submit a coffee sample for the chance to be crowned the best producer of their respective region. Setting this competition apart from many others however is the fact that the top scoring lots will be made available to the local market in Brazil rather than being destined for export abroad, underscoring the growing competition for these sort of differentiated coffees domestically.
In August, we completed our Ally Coffee Champ Trip 2022 which brought a group of champion competitors and esteemed professionals from around the coffee industry to Brazil. During the trip we visited a number of our producer partners in Alta Mogiana, Cerrado Mineiro, and Chapada de Minas, experiencing some of the passion and diversity found throughout Brazil’s coffee producing regions. You can find a recap of our journey, highlighting our experiences through images, videos, and quotes from attendees and hosts, live now on our Get Inspired blog!
Internationally, our team in Brazil is working to secure, consolidate, and begin shipping lots to warehouses around the world, including our newest operating region of Oceania & Asia with shipments heading to Singapore, New Zealand, and Australia in addition to the EU, UK, MENA, and North American regions. Slated to ship soon are microlots from several regions throughout Brazil’s coffeelands, alongside our Core Coffees Paubrasil from Cerrado Mineiro Designation of Origin accredited farms and Paubrasil Washed from Fazenda Mimoso in Oeste Baiano.