December arabica coffee (KCZ24) today is down -3.00 (-1.22%), and January ICE robusta coffee (RMF25) is down -96 (-2.20%).
Coffee prices today extended this week's sell-off, with arabica falling to a 2-month low and robusta sliding to a 2-3/4 month low. Coffee prices are under pressure as forecasts for rain in Brazil eased drought concerns. Meteorologist Climatempo said heavy rains are expected in Brazil's Minas Gerais region beginning on Saturday. Minas Gerais is Brazil's largest arabica coffee-producing area,
Losses in coffee prices accelerated today due to weakness in the Brazilian real (^USDBRL). The real today fell to a 2-3/4 month low against the dollar, encouraging export selling by Brazil's coffee producers.
In a bearish factor for coffee prices, the International Coffee Organization (ICO) on October 7 reported that global coffee exports rose +6.5% y/y in August to 10.92 million bags and that global exports during Oct-Aug rose +9.9% y/y to 125.67 million bags. Other export news has been bearish. Cecafe reported on October 9 that Brazil's Sep green coffee exports rose +34% y/y to 4.1 million bags. Also, Cecafe reported on July 11 that Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags.
Coffee prices have underlying support from concerns about longer-term coffee crop damage due to Brazilian drought conditions. Rainfall in Brazil has consistently been below average since April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil's 2025/26 arabica coffee crop. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden. Somar Meteorologia on Monday reported that rainfall in Brazil's biggest arabica coffee growing area of Minas Gerais received 25.1 mm of rain last week, or only 74% of the historical average. Robusta coffee also has support on concern that heavy rain from tropical storm Trami might delay Vietnam's coffee harvest, which runs from October to April.
Tightness in coffee inventories is supporting coffee prices. ICE-monitored arabica coffee inventories earlier this year partially recovered from the 24-year low of 224,066 bags posted in November 2023 to post a 1-1/2 year high of 858,474 bags on September 12. Since then, coffee inventories have been mainly moving sideways and were at 852,058 bags on Thursday. Meanwhile, ICE-monitored robusta coffee inventories fell to a 6-month low of 3,926 lots Thursday after climbing to a 1-3/4 year high of 6,521 lots in July. ICE-monitored robusta coffee inventories are moderately above the record low of 1,958 lots posted in February 2024.
Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta production. Vietnam's agriculture department said on March 26 that Vietnam's coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The USDA FAS on May 31 projected that Vietnam's robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season. On October 9, the General Department of Vietnam Customs reported that Vietnam's September coffee exports fell -32.6% m/m to 51,369 MT and that Vietnam's Jan-Sep coffee exports fell -11.7% y/y to 1.1 MMT.
In a supportive factor for coffee prices, Conab, Brazil's crop forecasting agency, cut its 2024 Brazil coffee production forecast on September 19 to 54.8 million bags from May's forecast of 58.8 million bags.
In a bearish factor, the International Coffee Organization (ICO) said on May 3 that 2023/24 global coffee production climbed +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. ICO also said global 2023/24 coffee consumption rose +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA's bi-annual report on June 20 was bearish for coffee prices. The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.2% y/y to 176.235 million bags, with a +4.4% increase in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags. The USDA's FAS forecasts that 2024/25 ending stocks will climb by +7.7% to 25.78 million bags from 23.93 million bags in 2023/24. The USDA's FAS projects that Brazil's 2024/25 arabica production would climb +7.3% y/y to 48.2 mln bags due to higher yields and increased planted acreage. The USDA's FAS also forecasts that 2024/54 coffee production in Colombia, the world's second-largest arabica producer, will climb +1.6% y/y to 12.4 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.
