Rabobank marginally boosted its forecast for the 2018/19 global coffee surplus on Friday, but warned growing weather risks in top growers Brazil and Vietnam could heighten volatility in the market. The world coffee market is poised for a surplus of 3.8 million 60-kg bags in the 2018/19 crop season, Rabobank said in its second quarterly outlook. This is up from a previous forecast of 3.2 million bags.
Rabobank said it expects the global market to see an arabica surplus totalling 3.3 million bags, only marginally higher than it forecast in its first quarterly report. Robusta coffee is likely to see a surplus of 0.5 million bags. Rabobank had previously forecast a balanced robusta market in the 2018/19 season.
However, unfavourable weather conditions in Brazil pose risks to output and could pave the way for greater volatility, Rabobank said.
"In Espirito Santo and Zona da Mata, where the arabica harvest usually starts early around May, rainy conditions have caused delays and potentially also quality damage." Meanwhile, the country's southern coffee growing regions - including Minas Gerais, Sao Paulo and Parana - suffered from drier-than-normal conditions ahead of the harvest, Rabobank said.
In Vietnam, coffee regions have seen favourable rains so far this season, but Rabobank pointed to increasing concerns about deteriorating weather conditions in the coming months.
"There is a good chance of an El Nino forming towards the end of the year, which would likely have detrimental consequences for robusta production," Rabobank said. "And that would come during a rather tight robusta balance sheet."
Rabobank also increased its forecast for a global coffee deficit in the 2017/18 season, to 3.6 million bags. It had previously forecast a shortfall of 2.6 million bags, with Rabobank pegging the change largely on a cut to output from the Ivory Coast.
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