Coffee: Japanese stocks decline, but consumption approaches 22-23 levels

Current Japanese stockpile data, released by the JCA, point to a 3,3% reduction between May and July, with the volume falling to 2,42 M scs. Although stockpiles are at the same levels as 22/23 for that period, they are still below the historical values ​​of 2,8 M scs.

According to Laleska Moda, Coffee Analyst at Hedgepoint Global Markets, “despite lower stocks being a supportive factor for prices, apparent demand from the Asian country has been falling since 2022, especially between 2022 and 2023. However, apparent consumption for the 23/24 season (Oct/23-Jun/24) has stabilized, with an accumulated volume to date similar to 22/23, around 4,7 M scs. Given this scenario, we will maintain our initial projection of total demand from Japan at around 6,2 M scs, practically stable compared to 22/23”.

On the other hand, it is important to monitor the monthly performance of consumption in the second half of 2024 for the 24/25 estimates, since high coffee prices may still have a negative effect on Japanese and global demand for the commodity.

“Prices, in general, continue to be supported by concerns on the supply side, especially in Vietnam. In addition to the lower production in 23/24, the development of the 24/25 season was marked by high temperatures and drought at the beginning of 2024 and now, with the possibility of excessive rainfall during the 24/25 season harvest”, highlights the analyst.

The lower supply in Vietnam can also be seen in Japanese imports, with the Asian countries' share falling from 34,2% in 22/23 to 33,1% in 23/24.

“There was also a reduction in the share of imports from other countries, such as those in Latin America, with the exception of Brazil. The latter ended up benefiting from production problems in other origins and increasing its share, from 33,4% in 22/23 to 37,5% in 23/24 - a trend also observed in other destinations, especially in the case of conilon/robusta”, he points out.

The latest Brazilian export data also reinforce this trend. According to Cecafé, a total of 3,73 M scs were shipped in August, an increase of 0,7% compared to 2023 and a new record for the month, with conilon standing out. While Arabica shipments fell 6,6% in the month, totaling 2,49 M scs, conilon exports totaled 924,6 thousand scs in August, an increase of 31,4% compared to Aug/23 and a new monthly record in Cecafé's entire historical series.

“It is worth noting that demand for conilon has even maintained the differential between the variety and arabica negative, as discussed in the analysis from the previous week (link),” he says.

“When we analyze Brazilian exports by destination, the growth in conilon shipments is also evident. Although Arabica also increased its share in the main destinations in 2024, Brazilian conilon made significant progress in markets such as Europe, Japan and, especially, other Asian countries. Thus, we expect Brazilian beans to continue to have a greater share in the global market in 24/25,” he indicates.

In summary, the latest JCA data indicate that Japanese stocks have declined again, remaining below historical averages. On the other hand, apparent demand for 23/24, which fell in recent seasons, has been showing signs of stability and supports our initial expectations of stable total demand in 23/24. However, it is worth noting that in the medium to long term, we still face the risk of a negative impact of high prices on coffee consumption.

Commodity prices continue to be supported by climate uncertainties and their possible impact on global production, especially in Vietnam. It is worth noting that the weather in Brazil has also increased market risk in recent weeks - due to the possible impact of the drought on 25/26 - especially since the country has been increasing its role as the world's leading coffee supplier while other countries face supply problems.

In this sense, Brazilian coffee exports continue to break records, driven mainly by conilon. Data by destination show that the variety has seen a substantial increase in places such as the European Union, Japan and other Asian countries. Thus, with expectations that [UC1] global supply of robusta will remain restricted in 24/25, our expectations are that national shipments will remain high, especially for conilon.