Coffee Update

Summary

World coffee production in 1998/99 is forecast at a record 107.5 million bags (60 kilograms or 132.276 pounds), 14 percent above the revised 1997/98 level and up 3 percent from the previous record set in 1996/97. Brazil's production in 1998/99 is forecast at 35.8 million bags, up 12.3 million bags from last season. Colombia's 1998/99 coffee crop is forecast to rise 2 percent from last season. Since the publication of the December 1997 circular (FTROP 4-97), downward revisions in the 1997/98 harvest have occurred in most major producing countries largely due to inclement weather.

World total coffee exports in 1998/99 are forecast at 81.1 million bags, up nearly 7 percent from the 1997/98 level, as total supply increases 7.5 million bags, or 6 percent. But because of the downward revisions in production in 1997/98, coffee exports in 1997/98 are estimated at 75.8 million bags, a drop of 11 percent from the previous year and from the December forecast. Ending stocks in 1997/98 are estimated at 23.3 million bags, down nearly 20 percent from the previous year. The increase in production in 1998/99 is forecast to lead to an increase of ending stocks to 24.5 million bags.

Brazil's arabica coffee prices on the New York spot market have declined steadily since January 1998, in response to increasing supplies and the prospects of a larger crop in Brazil. In May 1998, the New York spot price for Brazil's arabica coffee was $1.25 per pound, down 12 percent since April 1998, and down 41 percent from the May 1997 level. Brazil's coffee production during 1998/99 is forecast at 35.8 million bags, up 52 percent over the estimated 1997/98 level. Exportable supplies of coffee from the world are forecast at 81.7 million bags in 1998/99, up 17 percent, or 12.1 million bags over the preliminary 1997/98 level.

Brazil

Coffee production in Brazil is forecast to reach 35.8 million bags in 1998/99, 52 percent more than last season, but 10 percent less than the record 39.6 million bags harvested in 1961/62. Arabica coffee production is forecast at 30.8 million bags, while robusta output is forecast at 5.0 million bags. The reason for the 1998/99 increase is due to favorable weather that induced good vegetative development. In addition, most coffee growers could afford to invest in good crop management practices due to the strong and steady prices in 1997.

The U.S. agricultural attache's office in Sao Paulo made four field trips through Brazil's main coffee producing areas in order to assess Brazil's coffee production for 1998/99. In Minas Gerais, the 1998/99 forecast is 18.85 million bags, a 76-percent increase compared to the previous season. Good cherry setting and fruit formation, which stemmed from the two major flowerings, was observed in all regions of the state during field inspections. The dry spell that occurred in late December and early January slightly damaged the cherry setting for those fruits which resulted from a third and smaller flowering. Progress in fruit maturation is late compared to the previous season, since major blooming occurred in late September and late October. Progress in maturation in the southeastern producing region is notably ahead compared to the other producing regions. New plantings were observed in all regions visited. The new seedlings were planted to replace old coffee trees, or resulted from new area planted to coffee.

Coffee production in Espirito Santo in 1998/99 is forecast at 5.35 million bags, 34 percent above the 1997/98 outturn. Field trips were made to the center-north, where robusta production is dominant and the south where arabica is grown. The coffee production breakdown by variety is 3.2 million bags of robusta, a 14-percent increase over last season and 2.15 million bags of arabica or a 79-percent increase over last year. Arabica trees displayed good to very good vegetative development reflecting favorable weather in that region providing for flowerings that led to good cherry setting and fruit formation. Large-sized cherries were observed in the areas visited. Robusta trees, however, were affected by the dry weather. The first good flowering on robusta trees was damaged by unfavorable weather which resulted in flower abortion. The ensuing flowerings are expected to offset the damage to the first flowering.

Coffee production in Parana is forecast at 3.2 million bags for 1998/99 an increase of 28 percent compared to 1997/98. Coffee trees in this state had good to very good vegetative development and good cherry setting. Older coffee trees pruned and/or stumped after the 1994 frost and severe drought are fully recovered. The warm temperatures during the 1997 winter and the adequate volume of rainfall stimulated multiple flowerings, especially on older trees which may lead to quality-related problems during harvest.

Coffee production in the state of Sao Paulo for 1998/99 is forecast at 4.2 million bags, a 40- percent increase from last season. While coffee trees in the Mogi Mirim and Marilia producing regions show good vegetative development, elsewhere in the state coffee trees had from good to very good vegetative development. Late flowerings were partially damaged by hot temperatures during December 1997 and January 1998, but no major negative effect is expected in 1998/99 output. Coffee production in other producing states is forecast at 4.2 million bags, up 27 percent from last year. Breakdown by variety is 2.4 million bags for arabica and 1.8 million for robusta.

Total domestic consumption for marketing year (MY) 1998/99 is forecast at 12.5 million bags, with soluble coffee contributing 500,000 bags, green bean equivalent, close to a 9-percent increase compared to MY 1997/98. The expected higher coffee production for 1998/99 is likely to lead to a decrease in retail coffee prices, which should promote greater coffee consumption. Total domestic coffee consumption for MY 1997/98 has been revised downward to 11.5 million bags, with 500,000 bags accounted for by soluble coffee consumption. This revision is due to a slowdown in consumption caused by higher retail coffee prices.

The expected higher coffee production for MY 1998/99 is likely to increase Brazilian coffee exports. Total coffee exports for MY 1998/99 are forecast at 18.5 million bags, green bean equivalent. Green coffee beans ("arabica" and "robusta") should account for 16.4 million bags, while the remaining 2.1 million bags should come from the soluble industry. Brazil's coffee traders should be more competitive in international markets since domestic coffee prices should be lower, given expected increase in supply. Brazil's coffee exports for MY 1997/98 are revised to 14.3 million bags.

Brazil continues to offer government-owned stocks through its auction system.

Colombia

Colombia's 1998/99 coffee production is forecast at 11.0 million bags, up 2 percent from the revised 1997/98 crop of 10.8 million bags. The reason for the projected increase was the return to normal rainfall patterns beginning in April 1998, followed by widespread showers in coffee growing areas. The bloom from this rainfall was excellent and is expected to result in increased yields in the principal growing states.

The downward trend in world coffee prices in recent months caused uncertainty among Colombian coffee growers. One area of concern is whether the National Coffee Fund will support grower programs. Another concern among growers and exporters is the increasing incidence of broca-damaged coffee. Broca, a tiny coffee cherry borer tends to lower the quality of the coffee that it invades. In 1996/97, broca incidence was estimated at only 7 percent, but as much as 15 percent of this year's crop may become affected. Dry weather during the first half of this year has favored the spread of infestation. In past years, the National Coffee Growers Federation (FEDECAFE) purchased broca-damaged coffee beans for resale to the local processing industry. Colombia's coffee production peaked at 18 million bags in 1991/92, but declined steadily to 10.8 million in 1997/98. Colombia's coffee output over the next 3 to 5 years is projected to fluctuate around 11 million bags.

El Nino did not result in a dramatic drop in Colombia's 1997/98 coffee production as feared by the industry. Coffee output during the first half of the 1997/98 season actually increased 1 percent over the same period in the previous year. There are two main coffee crop cycles in Colombia. The main harvest occurs during the October-December period and accounts for 37 percent of annual production. The minor crop is harvested in May-July and represents another 26 percent of output, while the remaining 37 percent is evenly spread throughout the remaining six months of the year.

Indonesia

Coffee production in 1998/99 is forecast at 6.6 million bags, down 6 percent form last year's revised estimate and down 16 percent from the record 7.9-million-bag harvest set in 1996/97. The projected decline is due to drought, caused by El Nino, which has affected coffee production since its onset in June 1997. For 1998/99, the drought has pushed back the peak harvest period by about two months--from March/April to May/June--as there was insufficient moisture or humidity for the coffee trees to form blooms during July/September.

The 1997/98 coffee crop in Indonesia was revised downward to 7.0 million bags due to the El Nino-induced drought that affected the country for much of the past year. The drought-affected areas included the major growing regions of Lampung, Bengkulu, and South Sumatra, which account for about 70 percent of Indonesia's coffee production.

Export figures for MY 1997/98 have been revised downward to an estimated 4.9 million bags. The figure is based on the April-December 1997 export data released by the Central Bureau of Statistics and based on the January-February 1998 preliminary export data released by the Ministry of Industry and Trade. Exports during 1998/99 are also expected to decline due to lower production, with an initial forecast level of 4.75 million bags.

Although Indonesia is a major coffee producer, the per capita consumption of coffee is relatively small. In MY 1996/97, per capita consumption was estimated at 629 grams. This level is projected to have fallen slightly in MY 1997/98 as the economic crisis that continues to plague Indonesia has had a dramatic impact on consumer prices, including almost all food and beverage items. However, total coffee consumption is estimated to have increased by 0.5 percent to 2.09 million bags from the previous year's level of 2.08 million bags.

For MY 1998/99, consumption levels are forecast to decline to 2.0 million bags as the economic situation remains depressed. The local processing industry is trying to adjust to rising coffee prices by blending coffee beans with higher percentages of roasted corn. Lower priced powdered coffee (sold locally) sometimes contains a mixture of low quality coffee beans, roasted corn and coffee essence.

Vietnam

Coffee production in Vietnam for the 1998/99 season is forecast at a record 5.8 million bags, up 350,000 bags from last year's estimate and up slightly from 1996/97. Vietnam, principally known as a robusta producer is expanding area into arabica production. Of the 1998/99 total, arabica production is expected to account for 150,000 bags, a three-fold increase over the previous season.

Vietnam's coffee exports during 1998/99 are forecast at 5.5 million bags, unchanged from the estimated 1997/98 level. If realized, these levels of coffee exports will make Vietnam the third largest exporter of coffee, behind Brazil and Colombia, and the largest exporter of robusta coffee.

Mexico

Coffee production in 1998/99 is forecast at a record 5.6 million bags, 4 percent above the 1997/98 crop and 3 percent above the previous record set in 1995/96. The expected increase is due to larger planted area and new plants coming into production. Government assistance to support coffee growers' income is also expected to increase output. However, significant increases are not anticipated from small producers because of their continued poor tree maintenance habits. The 1997/98 production estimate was revised downward from the previous estimate to reflect damage caused by hurricanes and freezing weather towards the end of 1997 in certain areas of Oaxaca, Chiapas, and Guerrero states. The continued social unrest in Chiapas has not caused significant production losses, but an uncertain climate prevails.

For MY 1998/99, Mexico's coffee exports are not forecast to recover to 1996/97 levels in order to avoid low stocks and the need to import coffee beans from other countries. Mexico's green coffee bean exports are revised slightly upward for MY 1997/98 due to attractive export prices, however, prices will likely be lower than in MY 1996/97.

For MY 1997/98, due to higher retail prices, sluggish domestic demand and consumer preferences for soft drinks, domestic coffee sales are expected to remain unchanged from our previous estimate. Consumption for MY 1998/99 is forecast to slightly drop from the previous year despite the expected improvement in the economy and consumer purchasing power. Exports remain more attractive than sales in the domestic market.

With increased exports, domestic coffee supplies have been insufficient to meet processor requirements through MY 1997/98. Thus low-quality green coffee beans were imported by processors from Asian sources to the chagrin of domestic producers who feared that such imports would endanger Mexico's domestic coffee production with pests and diseases not present in Mexico. According to government authorities, processors could also import semi-roasted coffee, if necessary, for MY 1998/99. Import volumes will basically depend on export levels and Mexico's commitment to not import significant amounts of low-quality coffee in order to gain more access to export markets. More than 80 percent of total Mexican coffee exports go to the U.S. market.

Cote d'Ivoire

Coffee production in 1998/99 in Cote d'Ivoire is forecast at 4.1 million bags, the same as last year, but 33 percent less the 1980/81 outturn of 6.1 million bags. Dry weather in the latter part of December through January did not prevent trees from flowering, but the harsh drought in February caused flowers to fall. The second flowering started in March, but the duration of drought extending into early April also contributed to some loss. While cherry formation is low in many areas, especially in old plantations, the higher cherry formation in young and regenerated plantations, and in areas which received sufficient rains is expected to maintain production levels near 1997/98.

Field visits indicated that overall cherry formation was about the same as last year. However, there was wide variation in cherry formation within the same geographical area due to climate differences, and maintenance level of individual plantations. There were many cases where cherry formation was poor on one plantation while one adjacent to it was very high.

Exports of total coffee from Cote d'Ivoire are forecast at 5.4 million bags in 1998/99, an increase of nearly 9 percent from 5.0 million bags estimated for 1997/98. Following the government of Cote d'Ivoire's decision to liberalize coffee exports in October 1998, it has established a one-stop shop for the exportation of coffee and cocoa with the aim of facilitating and accelerating administrative procedures. It is also meant to produce uniform export statistics by the different administrative sectors. With the new system, exporters will now be required to provide only an export certificate instead of several documents previously required.

Uganda

Uganda's production of coffee during 1998/99 is forecast at 3.8 million bags, up 15 percent from the estimated 1997/98 level of 3.3 million bags. The 1997/98 level represents an estimated decline from the previous year of 24 percent. Uganda's exports of coffee in 1998/99 are forecast to increase to 4.0 million bags, up over 50 percent from the depressed 1997/98 level.

India

India's 1998/99 coffee production is forecast at 3.5 million bags, down 8 percent from the previous season's record crop of 3.8 million. The forecast consists of 2.2 million bags or robusta and 1.6 million of arabica. Good leaf growth following the 1997/98 harvest created optimism that the 1998/99 crop would exceed the prior year's output. However, the absence of rain (January-March 1998) has dimmed prospects for a larger robusta crop, although more recent rains should enable the arabica crop to remain stable. The goal of the Indian Coffee Board is to increase production to 4.0 million bags within the next several years. To achieve this goal, growers need to improve their yields, which currently average 850 kilograms per hectare.

Guatemala

Coffee production in Guatemala for 1998/99 is forecast at 3.1 million bags, a decline of 11 percent from last year and 24 percent below the record crop of 4.2 million bags in 1996/97. The lower crop expectations for 1998/99 are mostly weather related. Late rains and an unusually dry period between the months of January and May 1998, have already affected around 30-40 percent of coffee flowering. Decreases in world prices is likely to result in less investments in coffee crop inputs.

Farming of organic coffee is increasing in popularity in Guatemala. Guatemala's registered organic coffee production accounts for about 7 percent of total output, up from 3 percent in 1997. The tendency to increase organic coffee production is due to the bonus given above the regular price for non-organically grown coffee.

Guatemala's exports in 1998/99 are forecast at 3.2 million bags, unchanged from the revised 1997/98 level. The 1997/98 revised level is down 1.0 million bags from the December estimate. This decrease in exports is due to a decrease in production and an excess of low quality coffee called "natas" which do not fulfill the international specifications for exports and are left for local consumption.

Honduras

The 1998/99 coffee production is forecast at 2.6 million bags, slightly less than the record crop produced last season. However, the continued expansion in crop area and the recent development of a rust-resistant variety, suggest that production will continue to expand in the near future. Although the effects of El Nino on volume was not too significant, the unusually dry and irregular rainy season in 1997 did diminish the bean size of the 1997/98 crop.

Costa Rica

Coffee production for 1998/99 is forecast at 2.2 million bags, down 8 percent from last year and 21 percent less than the record 2.8-million-bag crop of 1988/89. The expected lower production is due to later rains than normal. For the 1997/98 crop, the influence of El Nino on production was felt mainly on the quality, with bean size slightly smaller than normal. This resulted in lower prices received by growers.

El Salvador

Coffee production for 1998/99 is forecast at 2.0 million bags, nearly the same as last year, but 500,000 bags less than 1996/97. The reason for the decline is the delay of the rainy season for over a month that has damaged coffee trees. In low altitude plantings the drought is so severe that large areas of coffee have dried up. Water is badly needed at this stage of plant development in order for trees to flower.

Peru

Coffee production in Peru for 1998/99 is forecast at 1.9 million bags, about 120,000 bags more than last year. Coffee in Peru is produced in the "high jungle region" on the eastern slopes of the Andes mountains. This region has been one of the areas most affected by terrorism and drug trafficking activities. These problems have hampered any increases in production and though terrorism has greatly diminished, it continues to be a perceived threat in this area.

Venezuela

Coffee production in 1998/99 is forecast at a record 1.5 million bags, 650,000 more than last year as weather has been favorable and new plantings begin to produce. The Venezuelan National Coffee Fund (FONCAFE) has promoted the planting of new trees over the past several years. The goal of FONCAFE is to revive 25,000 hectares by the end of the century in an effort to boost production. The coffee harvest in 1996/97 and the following season were plagued by heavy rains which shortened the flowering season and caused blight problems.

Nicaragua

The 1998/99 coffee crop is forecast at 1.1 million bags, 22 percent above the previous year's outturn due to renovation of trees in some coffee areas and better availability of credit. The outlook for the next 3-5 years is to gradually increase production. The country only produces arabica coffee with plantations located in the Pacific highlands and northern side of the country.

Ecuador

Coffee production for 1998/99 is forecast at 960,000 bags, 24 percent less that the 1.3 million bags produced in 1997/98. The upcoming harvest will be the lowest crop ever recorded. The projected reduction is caused by adverse weather due to El Nino.

Kenya

Kenya's 1998/99 coffee production is forecast at 917,000 bags, the lowest outturn since 1969/70 when 913,000 bags were harvested. The projected outturn is down 10 percent from the 1996/97 crop and down nearly half from the record 1.8 million bags harvested in 1995/96. The projected decline is due to unusually heavy rains caused by El Nino. The erratic weather resulted in abnormal coffee tree flowering and cherry setting. In addition, the industry is undergoing political and management problems that have tended to discourage farmers from producing at optimal levels.

Philippines

The 1998/99 coffee forecast is 725,000 bags, 4 percent above the outturn of the previous season. About 85 percent of all coffee grown is robusta, arabica accounts for 5 percent and all other types about 10 percent. Largely because of El Nino, 1997/98 coffee production is estimated to have declined by around 29 percent from the previous year's output.

United States

U.S. coffee stocks at the end of May totaled 2.0 million bags, up 135,000 bags from the April 30, 1998, level. Details follow:

Association of Coffee Producing Countries (ACPC)

Members of the ACPC have agreed to limit July-June 1998/99 exports of coffee to 52.13 million 60-kilogram bags.

U.S. Export Opportunity

Korea

According to a Market Brief on Coffee by the Agricultural Trade Office in Seoul, Korea offers excellent opportunities for U.S. roasted whole bean and ground coffee exporters. Coffee is a well established, and increasingly popular beverage among Koreans. Approximately 25 percent of Korean households currently own coffee makers, and this number is increasing rapidly. As consumer tastes become more westernized, roasted coffee consumption is expected to rise. Long a market dominated by instant coffee, consumers are now being drawn to roasted whole bean and ground coffee, including flavored varieties. This shift is clearly evident from the trade statistics. Between 1993 and 1997, total coffee imports (comprised overwhelmingly of green beans for local processing) more than doubled from $93 million to $200 million. However, the value of roasted coffee imports increased nearly 500 percent from $1.5 million to $7.3 million over the same period. This growth, while temporarily affected by the 1998 financial crisis, is expected to continue.

For a complete copy of the Market Brief on Coffee, contact Debra Pumphrey, on 202-720-8899 or fax the division on 202-720-3799.

Cocoa

United States

According to the Chocolate Manufacturers Association, U.S. cocoa grindings during the first quarter of 1998 totaled 99,189 tons, an increase of nearly 4 percent over the 1997 level of 95,435 tons. Chocolate liquor melted and cocoa butter melted during the first quarter in 1998 were reported at 3,512 tons and 15,710 tons, respectively. The chocolate liquor melted figure represented an increase of 67 percent from the first quarter of 1997, while the butter number posted a 3 percent gain.

Germany

Germany's grind during the first quarter of 1998 is reported at 62,154 tons, up a little over 1 percent from the previous year's first quarter. Germany's cocoa bean imports from third countries for the first quarter of 1998 totaled 98,540 tons, versus 84,725 tons in the same period of 1997. The leading supplier of cocoa beans to Germany during this period was Cote d'Ivoire with 86,384 tons, followed by Ghana with 3,355 tons.

Netherlands

The Netherlands' grind for the first quarter posted a 2.5 percent increase from the first quarter of 1997, and was up nearly 2 percent from the fourth quarter of 1997.

United Kingdom

Grind during January-March 1998 was up nearly 4 percent over the same quarter last year.

Last modified: Thursday, April 06, 2000