Dec arabica coffee (KCZ23) this morning is up +4.20 (+2.41%), and Jan ICE robusta coffee (RMF24) is up +14 (+0.58%).
Coffee prices this morning extended this week's rally, with arabica posting a fresh 4-1/2 month high and robusta climbing to a 2-week high. Shrinking ICE coffee inventories are supporting higher coffee prices. ICE-monitored arabica coffee inventories Wednesday fell to a 24-year low of 310,501 bags. Meanwhile, ICE-monitored robusta coffee inventories today were at 4,002 lots, modestly above the record low of 3,374 lots posted on August 31.
In a supportive factor for robusta coffee, Vietnam's General Department of Customs reported Wednesday that Vietnam's Oct coffee exports fell -14.2% m/m and -48.8% y/y to 43,725 MT and that coffee exports in the first ten months of this year (Jan-Oct) fell -10.7% y/y to 1.3 MMT. Also, Vietnam's coffee harvest this year is expected to drop more than -7% to 1.67 MMT, the smallest crop in four years, according to a Bloomberg survey of exporters and traders released on May 3. Vietnam is the world's largest producer of robusta coffee beans.
Global coffee exports are shrinking as the International Coffee Organization (ICO) on September 14 reported that global coffee exports during Oct-Jul were down -5.7% y/y at 103.736 mln bags. Cecafe reported on October 11 that Brazil's Sep arabica coffee exports fell -20% y/y to 2.4 million bags, the lowest for that month in 6 years. However, Brazil's Sep robusta exports rose more than fourfold to 624,999 bags. Brazil is the world's largest producer of arabica coffee and the second-largest producer of robusta coffee.
Abundant rain in Brazil is supportive of coffee yields and bearish for coffee prices. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 59.5 mm of rain in the past week, or 135% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
The U.S. Climate Prediction Center on June 8 declared an El Nino weather event, which is likely to be supportive of 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.
The USDA Foreign Agricultural Service forecasted in its June biannual report, released on June 22, that world coffee production in 2023/24 will increase +2.5% y/y to 174.3 million bags, with a +6.9% increase in arabica production to 96.3 million bags, and a -2.4% decline in robusta production to 78.0 million bags. USDA FAS forecasts that 2023/24 Brazilian coffee production will rise by +14.5% to 67.9 million bags, while Vietnam's 2023/24 production will fall -3.5% to 30.2 million bags. USDA FAS forecasts that 2023/24 ending stocks will edge higher by +0.8% to 31.8 million bags from 31.6 million bags in 2022-23.
Illustrating a tight coffee supply picture in 2022/23, the ICO said the global 2022/23 coffee market deficit widened to -7.3 mln bags from a -7.1 mln bag deficit in 2021/22. ICO reported that 2022/23 global coffee production increased +1.7% y/y to 171.27 mln bags, but 2022/23 global coffee consumption increased +1.7% y/y to a larger 178.53 mln bags.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
