Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
USDA - US Department of Agriculture
Mr. Tony Halstead
Ref.: you report , Coffee: World Markets and Commerce December 15, 2017 , Production, Markets and Trade Reports
Dear Mr. Tony.
I already wrote to you on December 16,2017 , since I did not get any answer, I'll write again.
As a researcher of coffee production in Brazil, I come to point out a great mistake that the USDA is making when Brazil's coffee production in the last two harvests, that is 2016/17 and 2017/18.
On December 15, 2017, the USDA published on December 15 the Coffee: World Markets and Trade Report, pointing out that Brazil harvested in 2017/18 the amount of 51.20 million bags.
I hereby warn you that the USDA harvest forecast is impossible, let us see why this statement is mine.
As early as 2016/17 the USDA points out in the same report a quantity of 56.10 million bags as the one harvested by Brazil.
CONAB, the Brazilian official and responsible agency for forecasting the harvest, points out a harvest forecast of 51.36 million bags, thus lower in almost 6 million bags.
In this way, we have a large difference, that one of the two respected bodies misses, therefore, a difference of more than 10% between the two forecasts is not admissible.
To resolve this doubt we have to leave the forecast field and go to the actual crop harvested, so I will base the derived crop equation.
Derived crop are obtained through the inventory of coffee from the previous year (2016), the use of total coffee (exports plus domestic consumption) in the 12-month period (April / 2016 to March / 2017), decreasing imports of coffee in the same period, and final coffee stocks of the current year (2017).
According to the surveys of Brazilian coffee stocks held on March 31, there is a decrease of 4,957,592 bags of stocks, as shown below:
Coffee stock in Brazil on March 31, 2016 = 15,078,997 bags, source CONAB
Coffee stock in Brazil on March 31, 2017 = 10,121,405 bags, source CONAB
Difference of stocks = 4,957,592 bags
In the period from April 2016 to March 2017, we had the following uses for Brazilian coffee:
Brazilian exports in the period from April16 to March17 (source CECAFÉ) = 33,488,053 bags
Domestic consumption in the period from April16 to March17, source ABIC = 21,200,000 bags
Thus, we had the use of 54,688,053 bags to meet domestic consumption and Brazilian exports.
As there were imports of 5,900 bags in this period.
In this way we have that for a total use of 54,688,053, which is the sum of Exports + Domestic consumption, there was a decrease in stocks of 4,957,592 bags and an import of 5,900 bags.
Mathematically it is concluded that the Brazilian Coffee Production in the 2016/17 harvest was 49,724,561 bags.
Equação de Safra Derivada ( Safra Real ) Brasil 2016/2017
Assim sendo, no período de 12 meses, temos os dados abaixo:
Estoque do Brasil em 31 de março de 2016 = 15.078.997 sacas, fonte CONAB 15.078.997
Estoque do Brasil em 31 de março de 2017 = 10.121.405 sacas, fonte CONAB 10.121.405
Diferença - 4.957.592
Exportações Brasileiras Abril16 até Março17 = 33.488.053 sacas, fonte CECAFÉ 33.488.053
Consumo interno Abril16 até Março17 = 21.200.000 sacas, fonte ABIC 21.200.000
Uso Total 54.688.053
Importações de café Abril 16 até Março 17 = 5.900 sacas, fonte MDIC/Secex 5.900
Produção = Uso Total - Diferença de estoques - Importações 49.724.561
Desta forma temos que para um uso total de 54.688.053, que é a soma das Exportações + Consumo interno, houve uma diminuição dos estoques de 4.957.592 sacas e uma importação de 5.900 sacas.
Thus, the REAL harvest harvested 2016/17 is below CONAB's forecasts, so we expect to harvest CONAB.
So, through this data, we have an overestimate of Brazilian production by the USDA which corresponds to 6.37 million bags.
One may have doubts about stock data, if the count is correct and covers 100% of inventories, but I think the most correct is to focus on the inventory difference from one year to the next, which showed a decrease of 4.95 millions of bags of stock.
And corroborating with lower production than USDA estimated, it is noted that Brazilian exports decreased in the period, even the Brazilian Government having sold all government stock, which was approximately 1.6 million bags.
Anyway, let's focus on the 2017/18 crop, forecast by USDA at 51.20 million bags, which is the subject of my complaint to the USDA.
Brazil is a continental country, and forecasting coffee in the most diverse regions requires hard work.
We have the official Brazilian forecast, made by CONAB, reporting a production expectation of 44.77 million bags, thus lower by 6.42 million bags than the USDA forecast.
Again we have a great difference of information between two important governmental organs.
The most prudent to do is to look at the production history of the previous year and based on this data and according to the history of the climatic conditions of each region from the beginning.
As we all know, the production cycle of Arabica coffees in Brazil is biannual, with larger harvests in even years and smaller harvests in odd years.
The 2017/18 production is a low cycle year with a smaller production of Arabica coffees.
In addition to the biennial decrease, we had an unfavorable production climate, it was during the harvest a lower production was noticed due to some factors:
a) smaller grain size, with lower incidence of sieves 17 and 18, due to less rain during the period of granulation.
b) lower yields, since more fruits were needed to make a sack of coffee, for example, when 420 liters of cherry (fruit) coffee were needed for a 60 kg bag in 2017, 450, 460 if you do the 60 kilos.
c) high incidence of drill (broca) in the coffee, bringing a small loss due to the perforated grain.
All of the above statements can be verified with news reports of the time and a survey of the Brazilian producing regions and researching the cooperatives with the reception of coffee in relation to the previous year.
As a matter of fact, Brazilian exports decreased quite a lot in the period that began in July 2017 until November 2017, using CECAFÉ data for comparative purposes, we have:
July to November 2016 14,718,603 bags.
July to November 2017 12,572,397 bags.
Therefore, in 2017 we have lower exports of 14.60% in the same period of 2016.
Consulting General Cooperatives and Warehouses, it is noted that current inventories are much lower than inventories from a year ago.
As an example I cite research that I did along the Cerrado and South of Minas Gerais.
In the Cerrado, current inventories are 50% lower than a year ago, and in Southern Minas, these inventories are 35% lower.
In my opinion, considering that there has been an improvement in the production of conilon coffee in the state of Espirito Santo, expectations of total coffee production by CONAB are still optimistic.
Therefore, I ask the USDA to verify the truth fulness of my information, and if it is true and reliable, it is necessary for the USDA to make a correction in its disclosed information.
I am at your disposal for more information.
The gross error of information in coffee production where millions of families in the world depend for their survival is unjust and cruel.