EGSI November CONSULTING 2013 COFFEE WORLD REVIEW WHAT’S INSIDE • 2013/14 Global Coffee Situation • EGSI World Coffee Forecast: November 2013 • World Domestic Coffee Consumption • World Coffee Weather • Technical Analysis by RCM Asset Management 1 EGSI COFFEE WORLD REVIEW A Monthly Publication on Global Supply and Demand of Coffee Published By Rao Achutuni, PhD, EGSI Consulting Mathew Bradbard & Kevin Davitt, RCM Asset Management 10110 Molecular Drive, Suite 210. Rockville, MD 20850 Website • www.egsiconsulting.com Email • [email protected] twitter@coffeeworldnews Telephone • 301-775-8814 EGSI Consulting also produces the monthly PalmOil World Report. Please Contact Dr. Rao Achutuni for all subscription inquiries EGSI Consulting, the publisher of the monthly Coffee World Review, does not accept any responsibility for the accuracy, contents, or opinions expressed directly or indirectly in this report. EGSI also denies any liability for any direct, indirect or consequential losses suffered by any individual or group of individuals as a result of relying or utilizing information and or opinions expressed in this report. Actions and conclusions drawn from this report are the sole responsibility of the reader 2 Table of Contents EGSI COFFEE WORLD REVIEW 2 2013/14 Global Coffee Situation 5 WORLD COFFEE PRICES 6 WORLD COFFEE PRODUCTION AND 2013/14 EGSI FORECAST BY COUNTRY 7 BRAZIL 8 COLOMBIA 10 MEXICO AND CENTRAL AMERICA 13 VIETNAM 14 INDONESIA 15 COTE D’IVOIRE 16 ETHIOPIA 16 UGANDA 17 COFFEE STOCKS 17 WORLD DOMESTIC COFFEE CONSUMPTION 18 WORLD COFFEE WEATHER SUMMARY 19 LI 3 LIST OF FIGURES FIGURE 1 WORLD MONTHLY AVERAGE COFFEE PRICES BY TYPE 6 FIGURE 2 WORLD COFFEE PRODUCTION BY TYPE DURING 2011/12 TO 2013/14 8 FIGURE 3 TIME-SERIES OF COLOMBIA ARABICA COFFEE PRODUCTION 11 FIGURE 4 COLOMBIA MONTHLY COFFEE EXPORTS. 12 FIGURE 5 COLOMBIA ARABICA COFFEE AREA (2002-2012) 12 FIGURE 6 COFFEE PRODUCTION IN BRAZIL, VIETNAM, COLOMBIA, AND INDONESIA 13 FIGURE 7 COFFEE PRODUCTION IN MEXICO AND CENTRAL AMERICA 14 FIGURE 8 ICE/NYSE END-OF-MONTH CERTIFIED COFFEE “C” STOCKS 17 FIGURE 9 DOMESTIC C OFFEE CONSUMPTION IN TOP 14 CONSUMERS 18 FIGURE 10 SOUTH AMERICA 90-DAY RAINFALL (A) CUMULATIVE (MM), AND (B) PERCENT OF NORMAL 19 FIGURE 11 CENTRAL AMERICA 90-DAY RAINFALL (A) CUMULATIVE, AND (B) PERCENT OF NORMAL 20 FIGURE 12 EQUATORIAL AFRICA 90-DAY RAINFALL (A) CUMULATIVE, AND (B) PERCENT NORMAL 21 FIGURE 13 S/SE ASIA 90-DAY RAINFALL (A) CUMULATIVE, AND (B) PERCENT NORMAL 22 RCM Asset Management - In Our Eyes - Novemeber 23 LIST OF TABLES TABLE 1 EGSI WORLD COFFEE PRODUCTION FORECAST BY COUNTRY 7 4 2013/14 Global Coffee Situation World coffee production continues to outstrip demand due to stagnant coffee consumption in both the EU and the United States. This combined with the rising supply of coffee attributed to favorable weather in South America and Southeast Asia is fueling the bearish market sentiment, however, coffee prices are slowly recovering since 06NOV. In Brazil (APR-MAR Group), the 2013/14 coffee crop is revised lower to 48M 60-Kg bags (↓5.6% YOY) due to erratic growing season weather conditions and some harvest losses. In Colombia (OCT-SEP Group), favorable weather conditions and cultivation of rust resistant varieties are helping boost coffee exports to about 900,000 60-Kg bags per month. We forecast the 2013/14 crop to easily attain 12M 60-Kg bags (↑20.8% YOY). Colombian Mild Arabicas are fetching premium prices over other Arabicas and Robustas. Mexico and the Latin America and Caribbean countries continue their recovery process from severe rust infestation. Rock bottom international coffee prices, coupled with little or no government subsidies are hurting small land holders. The rust outbreak caused widespread damage to trees from Guatemala, El Salvador, Honduras, and Nicaragua to Costa Rica. In Vietnam (OCT-SEP Group), favorable rainfall conditions boosted prospects for the 2013/14 Robusta and Arabica crops. Vietnam could very well produce a million bags of Arabica coffee this season. Vietnam’s 2013/14 total coffee production is projected by EGSI at 28.475M 60-Kg bags (↑14.1% YOY); Robusta production is estimated at 27.5M 60-Kg bags; and Arabica at (↑14.1% YOY). Low robusta prices relative to the Arabicas continue to attract coffee blenders. In Indonesia (APR-MAR Group) the return of milder weather is helping coffee production in Sumatra. Drier conditions across Java are slowing coffee development. High production costs and low market prices are sapping profitability out of coffee production. Total coffee production is projected at 9/05M 60-Kg bags (↓16.6% YOY). In Equatorial Africa, favorable weather is benefitting the 2013/14 coffee crop in Cote d’Ivoire, Cameroon, Gabon, Congo, Uganda, and Ethiopia. Dryness persists in Kenya and Tanzania. EGSI Consulting (EGSI) forecasts 2013/14 world coffee production at 145.795M 60-Kg bags (↑0.1% YOY). World Arabica production is forecast at 84.54M 60-Kg bags (↓0.8% YOY). The 2013/14 world Robusta production is forecasted at 61.255M 60-Kg bags, (↑1.5% YOY). Arabica supplies are down marginally but made up by some gains in Arabica coffee. ICE Arabica coffee prices have lost 23.33 percent year-to-date (YTD) but trading at USd110.25 (29NOV) up from a low of USd101.50 (06NOV). Robusta prices are trading around USd 87.83(US Markets) and USd81.42 9(EU Markets). The daily ICO Composite Price Indicator @ USd102.58/lb (↑0.3%), Colombian Milds @ 123.19/lb (↑0.1%), Other Milds @ 122.80 (↔), Brazilian Naturals (↑0.1%), and Robustas (↑0.8%) (28NOV) 5 WORLD COFFEE PRICES World monthly average coffee prices (FIG. 1) have been witnessing a strong and sustained bear market through October following the high established around April 2011. Colombian Mild Arabica’s are continuing to trade highest, followed by Other Mild Arabica’s, Brazilian Natural Arabica’s, and Robusta’s. A comparison of ICO monthly US price statistics shows that Colombian Milds declined by 3.44% MOM; Brazilian Natural Arabicas declined by 2.73 percent; Robustas declined by 4.65 percent MOM; and Other Mild Arabicas declined by 2.71 percent MOM. Robusta coffee continues to have a significant price advantage over Arabicas. Blenders and roasters will continue to take advantage of this price differential. The 2013/14 green coffee bean supply situation continues to be very bearish. Prospective investors continue to hold-out for coffee prices to fall further. Shifting consumer demand is moving towards single cup brewers, now common in most offices and several homes in the West. Coffee retailers in the U.S. are now cutting prices ahead of the holiday season to stimulate demand. Daily coffee prices are showing signs of recovery from 06NOV. ICE Arabica coffee prices have lost 23.33 percent year-to-date (YTD) but trading at USd110.25 (29NOV) up from a low of USd101.50 (06NOV). Robusta prices are trading around USd 87.83(US Markets) and USd81.42 9(EU Markets). The daily ICO Composite Price Indicator @ USd102.58/lb (↑0.3%), Colombian Milds @ 123.19/lb (↑0,1%), Other Milds @ 122.80 (↔), Brazilian Naturals (↑0.1%), and Robustas (↑0.8%) (28NOV). Figure 1 World Monthly Average Coffee Prices by Type 6 WORLD COFFEE PRODUCTION AND 2013/14 EGSI FORECAST BY COUNTRY An overview of weather, market factors, policy issues, EGSI Coffee Production Forecasts (TABLE 1), as well as production estimates from other government agencies are presented in this section. Some revisions were also made to the 2012/13 estimates based on in-country reports. Table 1 EGSI World Coffee Production Forecast for 2013/14 EGSI WORLD COFFEE FORECAST (OCT 2013 UPDATE) 2012/13 2013/14 (1000 60-Kg Bags) % CHANGE (YOY) 2012/13 (1000 60-Kg Bags) % CHANGE (YOY) COUNTRY ARABICA ROBUSTA TOTAL ARABICA ROBUSTA TOTAL ARABICA ROBUSTA TOTAL ARABICA ROBUSTA TOTAL Brazil 37000 11000 48000 -3.5% -11.9% -5.6% 38344 12482 50826 10.5% -13.9% 3.3% Vietnam 975 27500 28475 14.7% 14.1% 14.1% 850 24100 24950 6.3% -4.4% -4.0% Indonesia 1550 7500 9050 -11.4% -17.6% -16.6% 1750 9100 10850 34.6% 30.0% 30.7% Colombia 12000 0 12000 20.8% 0.0% 20.8% 9930 0 9930 29.7% 0.0% 29.7% Ethiopia 6500 0 6500 2.8% 0.0% 2.8% 6325 0 6325 0.1% 0.0% 0.1% India 1800 4000 5800 9.6% 9.3% 9.4% 1643 3660 5303 -2.8% 3.4% 1.4% Honduras 4000 0 4000 -9.1% 0.0% -9.1% 4400 0 4400 -23.5% 0.0% -23.5% Peru 4000 0 4000 -7.0% 0.0% -7.0% 4300 0 4300 -16.5% 0.0% -16.5% Guatemala 3700 10 3710 -11.9% 0.0% -11.9% 4200 10 4210 -4.5% 0.0% -4.5% Mexico 3200 150 3350 -14.7% -14.3% -14.6% 3750 175 3925 -8.5% -12.5% -8.7% Uganda 675 2850 3525 3.8% 5.6% 5.2% 650 2700 3350 -25.5% 21.1% 8.0% Cote d'Ivoire 0 2075 2075 0.0% 3.8% 3.8% 0 2000 2000 0.0% 25.0% 25.0% Malaysia 0 1450 1450 0.0% 3.6% 3.6% 0 1400 1400 0.0% -3.4% -3.4% Nicaragua 1375 0 1375 -12.7% 0.0% -12.7% 1575 0 1575 -16.2% 0.0% -16.2% Costa Rica 1475 0 1475 -7.8% 0.0% -7.8% 1600 0 1600 -9.9% 0.0% -9.9% Tanzania 535 450 985 7.0% -13.0% -3.1% 500 517 1017 37.0% 158.5% 80.0% PNG 900 80 980 12.5% 6.7% 12.0% 800 75 875 -40.7% 50.0% -37.5% Kenya 775 0 775 1.0% 0.0% 1.0% 767 0 767 -6.1% 0.0% -6.1% Thailand 0 900 900 0.0% 4.7% 4.7% 0 860 860 0.0% 1.2% 1.2% El Salvador 800 0 800 -8.6% 0.0% -8.6% 875 0 875 -25.5% 0.0% -25.5% Venezuela 780 0 780 6.8% 0.0% 6.8% 730 0 730 4.3% 0.0% 4.3% Others 2500 3290 5790 10.8% 0.0% 4.4% 2256 3290 5546 -29.9% -10.0% -19.3% WORLD 84540 61255 145795 -0.8% 1.5% 0.1% 85245 60369 145614 1.5% -0.2% 0.8% World coffee production in 2013/14 continues to surge due to generally favorable growing conditions in Colombia, Vietnam, and India.