Coffee Prices Fall on Larger Supplies from Brazil

March arabica coffee (KCH24) on Monday closed down -0.70 (-0.36%), and Mar ICE robusta coffee (RMH24) closed down -25 (-0.75%).

Coffee prices on Monday gave up an early advance and closed lower on signs of larger coffee exports from Brazil after exporter group Cecafe reported Brazil's Jan coffee exports jumped +45% y/y to 3.7 million bags.  Brazil is the world's largest producer of arabica coffee beans.

Coffee prices on Monday initially opened higher, with arabica posting a 1-1/2 month high on forecasts for limited rain in Brazil this week.  Also, robusta coffee supplies continue to shrink after ICE-monitored robusta coffee inventories fell to a record low.

Dry conditions in Brazil are supporting arabica coffee prices.  Somar Meteorologia reported last Monday that Brazil's Minas Gerais region received 30.9 mm of rainfall in the past week, or 49% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Coffee inventories are tight, which is a supportive factor for coffee prices.  On Monday, ICE-monitored robusta coffee inventories fell to a record low of 2,461 lots.  ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, although they recovered moderately to a 3-month high last Friday of 297,795 bags.

A bearish factor for coffee was last Wednesday's report from the International Coffee Organization (ICO) that Dec global coffee exports rose +13.6% y/y to 12.168 million bags, and from Oct-Dec global coffee exports rose +6.8% y/y to 32.419 million bags.

A negative factor for coffee was last Monday's hike by Safras & Mercado for its 2022/23 Brazil coffee crop estimate to 61.1 million bags from a previous estimate of 58.9 million bags.  Also, Brazil exporter group Comexim on February 1 raised its Brazil 2023/24 coffee export estimate to 44.9 million bags from a previous estimate of 41.5 million bags.

An increase in Vietnam's coffee exports is bearish for robusta prices after Vietnam's General Statistics Office on January 29 reported that Vietnam's Jan coffee exports rose +47.6% y/y to 210,000 MT.  Vietnam is the world's largest producer of robusta coffee beans.

Coffee buyers are shunning robusta bean purchases from Vietnam as shipping costs and delivery times have surged due to attacks by Houthi rebels on commercial ships in the Red Sea, which has prompted some of the world's main robusta coffee buyers to reduce bean purchases from Vietnam and secure more robusta supplies from Brazil.  

Tight robusta coffee supplies from Vietnam are bullish for prices.  Vietnam's General Department of Customs reported on January 10 that Vietnam's 2023 (Jan-Dec) coffee exports fell -8.7% y/y to 1.62 MMT.   Also, Vietnam's agriculture department on November 3 projected Vietnam's coffee production in the 2023/24 crop year could drop by -10% to 1.656 MMT, the smallest crop in four years, due to drought.  Meanwhile, the Vietnam Coffee Association on December 5 projected that 2023/24 Vietnam coffee production would fall to 1.6 MMT-1.7 MMT, down from 1.78 MMT a year earlier.  

A bearish factor for arabica was the projection from Conab, Brazil's crop forecasting agency, on January 25 that Brazil's 2024 arabica coffee production would climb +5.4% y/y to 58.1 million bags.  The 2024 coffee crop year is seen as the most productive of Brazil's biennial coffee year cycle.

This year's El Nino weather event is bullish for coffee prices.  An El Nino pattern typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production.  The El Nino event may bring drought to Vietnam's coffee areas late this year and in early 2024, according to an official from Vietnam's Institute of Meteorology, Hydrology, and Climate Change.

In a bearish factor, the International Coffee Organization (ICO) projected on December 5 that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year.  ICO also projects global 2023/24 coffee consumption will rise +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.

The USDA's Foreign Agriculture Service (FAS), in its biannual report released on December 21, projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags, and a -3.3% decline in robusta production to 74.1 million bags.  The USDA's FAS forecasts that 2023/24 ending stocks will fall by -4.0% to 26.5 million bags from 27.6 million bags in 2022-23.  The USDA's FAS projects that Brazil's 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage.  The USDA's FAS also forecasts that 2023/24 coffee production in Colombia, the world's second-largest arabica producer, will climb +7.5% y/y to 11.5 mln bags.
 

• Coffee Prices Mixed as Supplies from Brazil Expand
• Sunday Scaries: What I'm Watching This Week In The Grain Markets
• Cocoa Prices Continue to Post Record Highs on Scant Global Supplies
• Sugar Prices Supported by Reduced Brazil Sugar Cane Crush Estimates

Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.