Softer, Arabica coffee may gain consumption share in Brazil after the conilon boom

Arabica coffee, considered softer and sweeter, will probably recover part of the lost share in the composition of the “blend” of the roasted and ground product sold to Brazilian consumers in the 2023/24 season, according to analysts.

This could come from firm local prices for canephor beans – known as conilon or robusta and naturally more bitter than arabica – amid global market support for the variety, which hit a record high in June amid tight supply in countries such as Vietnam and Indonesia.

The situation also considers Brazilian government data of a larger arabica crop in Brazil, the world’s second largest coffee consumer, while the canephora crop will be smaller in the country.

Consumption of arabica beans in Brazil could double in 2023/24 to 6.6 million 60 kg bags compared to the previous cycle, while demand from the canephoras industry is expected to fall from 18.7 million bags in 22/23 to 15 5 million bags in the current season, according to risk management and consultancy firm hEDGEpoint Global Markets.

“It’s double that, but we’re still seeing a far below average ‘mix’ (historic for Arabica),” hEDGEpoint coffee analyst Natália Gandolphi told Reuters.

He recalled that in the past the percentage of Arabica and Robusta/Conilon in the production of roasted and ground coffee in Brazil was 50% for each variety.

“There has been this decline (in the use of arabica) over the past two years, we are seeing a small recovery, but we still don’t see a normal situation,” commented the specialist, believing that the addition of arabica in the “blend” should intensify later in the harvest. .

The expectation of higher demand for Arabica beans comes in a year in which the Brazilian coffee crop of this variety will grow by almost 16%, to 37.9 million 60 kg bags, according to the latest data from the State-owned Conab. On the other hand, canephora production will decrease by 7.6%, to 16.8 million tons, according to the Brazilian government agency.

The day before, the United States Department of Agriculture (USDA, its acronym in English) indicated an increase in global coffee production, citing the expectation of a bigger harvest of arabicas, particularly from Brazil, and a smaller and more robust crop.

Gil Barabach, a specialist at the consulting firm Safras & Mercado, agrees that the Brazilian industry could increase the percentage of Arabica in the “blend”.

“Especially if it starts to look more Arabica with a weaker drink and a relatively lower price… And that’s to be expected with a wetter winter,” the consultant said, referring to possible quality issues for the grain that rains can bring during the harvest .

Sought after, the Brazilian Coffee Industry Association (ABIC) did not comment on the matter.

A coffee supply index compiled by Abic showed that supply of arabica coffee has improved in Brazil, going from a level of 6 (more selective supply) in March to something closer to 7 (normal) all year round. beginning of June.

The gauge for conilon dropped from about 7 to 6.28 over the same period, its lowest level in about a year, at least. Below 7, the offer is considered “selective”, at a time when producers were reluctant to sell, despite the start of the harvest.

According to information from hEDGEpoint, the “spread” between the prices of an Arabica with a higher incidence of defects and the type 7 conilon is currently closer to 200 reais per bag, against around 500 reais per bag the previous year.

Sweeter and softer, Arabica beans generally have a premium over canephors, which are used in “blending” and also by the instant coffee industry.

But that spread has narrowed, something the market will follow, especially after Arabica coffee traded on the ICE exchange hit its lowest level in about six months on Friday, as Brazil’s crop advance came under pressure.

EXPORT

Despite the expected reduction in the use of robusta and conilon in the “blend”, the hEDGEpoint analyst does not see a large increase in the export surplus in Brazil, as the crop of Espírito Santo, the main producer of this variety , “is smaller”.

But he admits, also due to the historical highs recorded by the prices of Robusta on the international market, that there could be a greater interest in selling Conilon abroad. This would also depend on how much the canephora mixture could be reduced in the composition of the roasted and ground Brazilian “blend”.

“We are seeing a recovery in exports (conilon), which are finally heading towards a seasonal movement, something we hadn’t seen in the previous cycle,” he said, noting that export volumes are still below average.

Brazil exported low volumes of Robusta and Conilon in the last harvest, as the local industry increased the participation of these coffees in the “blend”, when the supply of Arabica was lower.

Source: Terra

Rose

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