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The coffee supply and demand situation has been very volatile during the past 6 months. In May 1997, the average price for Colombian mild arabicas was $3.19 per pound, more than double the price in May 1996. The price for Brazilian and other arabicas jumped over 55 percent in the same period. This price volatility has been caused by uncertainty in the market about supplies--especially production in Brazil and Colombia. Also, labor disputes in both countries have caused some problems with the regular shipment of coffee. Further, U.S. coffee stocks are at very low levels.
Total coffee supply in producing countries in 1997/98 is forecast at 130.5 million bags, a decline of 2.5 percent from the 1996/97 level. Almost all of this drop, year-to-year, is the result of lower beginning stock levels. Beginning stocks of coffee in 1997/98 are forecast at 26.0 million bags, the lowest level since 1980/81. This is 6.1 million bags, or nearly 19 percent, below the beginning stock level of 1996/97. The decline in stocks from one year to the next is attributed to a significant increase in coffee exports. Total 1996/97 coffee exports are estimated at 82.9 million bags, up almost 11 percent from the 1995/96 level.
Many coffee producing countries have increased their exports during the 1996/97 marketing year in response to higher world prices. Capitalizing on these higher prices, some countries--like Brazil--exceeded the export quota limit suggested by the Association of Coffee Producing Countries (ACPC). Total coffee exports in 1997/98 are forecast at 84.4 million bags. This represents only a slight increase of 1.5 million bags from the 1996/97 level, because of the reduced beginning stock level. As a result, however, ending stocks in 1997/98 are forecast at only 20.0 million bags.
World coffee production for 1997/98 is forecast at 103.7 million bags, up nearly 3 percent from the previous year, but slightly below the record level of 1991/92. Brazil's production in 1997/98 is forecast at 28.0 million bags, up 500,000 bags from 1996/97. Colombia's coffee crop in 1997/98 is forecast at 11.3 million bags, up 1.0 million bags from the reduced crop of 10.3 million bags in 1996/97. Indonesia's coffee crop is forecast to decline to 6.8 million bags, from 7.6 million bags in 1996/97. The world's fourth largest coffee producer--Mexico--is forecast to increase its crop size to 5.7 million bags. Vietnam continues to expand the production of coffee. The coffee crop in 1997/98 is forecast at 5.0 million bags, up nearly 19 percent over the previous year.
Total exportable production (total production less domestic consumption in producing countries) is forecast to continue to increase. Exportable production in 1997/98 is forecast at 78.1 million bags, an increase of over 2 percent from 1996/97. This increase, though, is considerably less than the estimated increase of over 16 percent from 1995/96 to 1996/97. Almost every country is forecast to post the same or higher exportable production levels, except for Brazil, Cote d'Ivoire, and Indonesia.
Frosts may occur in Brazil during the months of June, July, and August. Temperatures will be watched closely during this period and the market will respond on a day-to-day basis, depending on the weather reports from Brazil.
Brazil
Brazil's production of coffee in 1997/98 is forecast at 28.0 million bags, up from the revised 1996/97 level of 27.5 million bags. See the "World Agricultural Production" of June 1997 (WAP 6-97) for a complete analysis of the production situation. On May 20, 1997, Brazil's government announced the authorization of a credit line of approximately $234 million for the harvesting of this year's coffee crop. The money is to come from the FUNCAFE coffee fund. Repayment will be at Brazil's long-term interest rate plus 3 percent.
Brazil's exports of total coffee in 1997/98 are forecast at 19.5 million bags, an increase of nearly 1.3 million bags from the preliminary 1996/97 level. Although Brazil is a member of the ACPC, in order to capitalize on the higher prices of coffee, Brazil has steadily shipped coffee. Brazil has informed the ACPC that exports of coffee have exceeded its target level set for January-June 1997. Brazil's quota for exports during January-June was 6 million bags. However, reports indicate that Brazil's exports by the end of May had already totaled more than 6 million bags.
Coffee consumption in Brazil is forecast at 12.0 million bags in 1997/98. This represents an increase of 9 percent over the 1996/97 estimated consumption level. The Brazilian Coffee Industry Association (ABIC) has launched promotional campaigns to increase coffee consumption in Brazil. Some other factors that have helped domestic consumption has been the stable economy as a result of the "Real Plan" of July 1994, and the improvement in the overall quality of coffee destined for the domestic market. However, the increase in coffee prices may temper this increase in demand through higher domestic prices for coffee. Strong world prices for coffee have led Brazil's exporters to export coffee to capture these lucrative prices, possibly resulting in lower domestic availabilities.
Following is information about the auctions of government-owned stocks in Brazil. The next auction in Brazil is scheduled for July 2, 1997.
Brazil: Auction of Government-Owned Coffee Stocks
Date of Auction Quantity Offered Quantity Sold Price Range
----60 kilogram bags--- US$/bag
1997
January 8 120,100 120,100 102.00-130.00
February 5 200,000 114,940 102.00-142.00
March 5 (all segments)
174,380 173,370 134.00-163.00
March 5 (domestic
soluble industry) 82,610 82,610 77.00-80.00
April 2 (all segments)
300,273 102,745 135.58-152.52
April 2 (domestic
soluble industry) 25,915 25,915 62.49-74.14
May 7 200,091 128,005 117.68
June 5 150,000 147,123 N/A
June 11 42,250 42,250 N/A
Colombia
Colombia's coffee production in 1997/98 is forecast at 11.3 million bags, 1.0 million bags, or nearly 10 percent, above the short crop of 1996/97. Because of the high level of exports in 1996/97 relative to production, combined with the short crop, ending stocks in 1996/97 are estimated at 4.1 million bags. This will mean that total supply in 1997/98 is forecast to drop over 7 percent. However, because of the high prices for coffee, exports are forecast only slightly less than the 1996/97 level. As a result, ending stocks are forecast to drop 1.0 million bags, to 3.1 million bags. Total consumption in Colombia is forecast to increase slightly to 1.55 million bags, up from 1.53 million bags estimated for 1996/97.
According to press reports, Colombia's Finance Minister opened unlimited coffee registrations for July-August 1997.
On June 13, 1997, Colombia cut its internal coffee price to 393,375 pesos per 125-kilogram load. This represents a decline of 11.6 percent from the previous week.
Indonesia
Indonesia's 1997/98 coffee production is forecast at 6.8 million bags, down 10.5 percent from the revised 1996/97 level. The reduction is attributed to excessive rains and strong winds that destroyed coffee flowers and decreased the fertilization level.
Total coffee exports--comprising mostly green--are forecast at 4.6 million bags in 1997/98, nearly 25 percent lower than the revised export level of 6.1 million bags in 1996/97. During April 1996 through December 1996, the United States was the leading export market for Indonesia. The forecast decline in exports is because of the lower crop size. Coffee consumption in Indonesia is forecast to grow to 2.2 million bags, or up 2 percent from last year. Per capita consumption in Indonesia is estimated at 0.65 kilograms. This is low compared to other countries. This is mainly because tea is the traditional beverage, especially for meetings and special events.
Mexico
Mexico's coffee production during 1997/98 is forecast to increase 100,000 bags to 5.7 million bags, in response to favorable state and federal support programs. Exporters in Mexico have capitalized on the higher world prices for coffee by exporting more. Exports during 1996/97 are estimated at 4.73 million bags, an increase of nearly 3 percent from 1995/96. Exports of coffee are forecast to continue to increase in 1997/98 to 4.8 million bags. As a consequence of rising retail prices, lower availabilities, and consumers' substituting other beverages, domestic consumption of coffee has fallen. Consumption is estimated at 970,000 bags in 1996/97, a drop of over 8 percent from the previous year, and is forecast to drop again in 1997/98.
In May, the Mexican Specialty Coffee Association (Calicafe) was officially launched. Calicafe is open to all participants in Mexico's coffee industry with an interest in coffee. The association wants to promote and market quality coffee from Mexico. Mexico seeks to improve the quality and image of its coffee in the hopes of raising coffee prices in Mexico.
According to sources, the Secretariat of Agriculture (SAGAR) will allow imports of 150,000 bags of robusta coffee during July through September. Shipments of coffee from Mexico have been strong during the 1996/97 marketing year and this has created a shortage of coffee for the domestic market. As a result, local coffee roasters and processors in Mexico have not been able to obtain enough coffee to meet their demand. SAGAR has said that the coffee allowed into Mexico will have to comply with national and international phytosanitary requirements.
Venezuela
The Andean Pact Board (JUNAC) tribunal rejected Venezuela's ban on the import of roasted coffee. Imports were prohibited from Andean Group countries in 1962 because of the risk of importing the borer worm. The JUNAC tribunal stated that there is no adequate reason to ban roasted coffee, and called on Venezuela to modify the resolution that bans roasted coffee.
Latin America
Coffee cooperatives of Latin America countries have agreed to form an association, "Association of Latin American and Caribbean Coffee Cooperatives". Reports indicate that the scope and structure are currently limited to technical cooperation.
Vietnam
Vietnam is now the fifth largest coffee producer in the world. Production during 1997/98 is forecast at 5.0 million bags, up 785,000 bags from last year's level and up more than two and one-half times the 1991/92 level. The primary growing region is Daclac, situated in Vietnam's central highlands.
Exports of coffee during 1996/97 are estimated at 4.0 million bags. Exports are forecast to continue to increase during 1997/98, to 4.7 million bags. Exporters in Vietnam have benefitted recently from the high world prices.
Association of Coffee Producing Countries (ACPC)
The ACPC agreed to restrict coffee exports after the current agreement ends in June. Members of the ACPC have agreed to limit exports in July-June 1997/98 to 52.75 million bags. However, the country allocation of this limit will be set at a meeting in September 1997.
United States
USDA's Animal and Plant Health Inspection Service is proposing to revise regulations for importing coffee. Part of the proposal will amend the import provisions to make it clear that coffee fruits or berries are prohibited entry into all parts of the United States because these imports present a significant risk of introducing the Mediterranean fruit fly. In addition, it clarifies how samples of unroasted coffee may move through Hawaii and Puerto Rico in transit to other destinations. The final date for comments is July 8, 1997.
Maxwell House Coffee Company raised its prices again on May 20, 1997, to $3.36 for a standard 13-ounce can of regular ground coffee, and to $4.06 for decaffeinated ground coffee. This represents a 30-cent increase from the previous price. This price increase follows by one day the announcement by Folgers of its decision to raise retail prices. Since February, Maxwell House and Folgers Coffee Company have raised the retail price of coffee by $1.10 for the 13-ounce can. This represents an increase of nearly 50 percent.
For the second time this year, Starbucks raised prices in its retail stores of drip coffee by 5 cents a cup, espresso by 10 cents a cup, and the price of whole bean coffee by 40 cents a pound. A Starbucks official said the company was taking the minimal increase to offset higher costs for coffee they must buy.
U.S. coffee stocks at the end of May totaled 1.977 million bags, up 122,000 bags from the April 30, 1997, level. Details follow:
| Location | April 30 | May 31 | Difference |
| New York | 257,000 | 289,000 | 32,000 |
| New Orleans | 752,000 | 853,000 | 101,000 |
| Jacksonville | 147,000 | 151,000 | 4,000 |
| Miami | 119,000 | 142,000 | 23,000 |
| Houston | 121,000 | 92,000 | (29,000) |
| Laredo | 278,000 | 248,000 | (30,000) |
| Port Everglades | 0 | 0 | 0 |
| San Francisco | 159,000 | 173,000 | 14,000 |
| Los Angeles | 8,000 | 8,000 | 0 |
| Seattle | 0 | 0 | 0 |
| Norfolk | 14,000 | 21,000 | 7,000 |
| Baltimore | 0 | 0 | 0 |
| Total | 1,855,000 | 1,977,000 | 122,000 |
Europe
Germany's second largest coffee roaster, Tchibo Frisch-Roest-Kaffee GmbH, has announced another increase in its retail prices. Retail prices will increase an average of 1.40 marks per kilogram. Tchibo last raised retail prices in early May. Also in Germany, coffee roaster Eduscho GmbH & Co. KG, announced on June 19, 1997, that effective June 30, it would raise retail coffee prices of most of its products by 0.50 marks per 500-gram packet. In the Netherlands, the leading Dutch roaster raised the retail price for a standard 250-gram pack of coffee to 4.30 guilders, up from 4 guilders established May 7, 1997. Retail prices all across Europe have been boosted as a result of higher world green coffee prices.
Japan
Nestle Japan Ltd., a subsidiary of Nestle SA, announced on June 3, 1997, that it would raise instant coffee prices by an average of 10 percent. In addition, Ajinomoto General Foods, Inc., announced that it would raise instant coffee prices by an average of 10 percent, as of July 1, 1997. Both of the increases are the result of higher coffee prices since the beginning of the year.
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