March arabica coffee (KCH24) this morning is down -5.40 (-2.93%), and Jan ICE robusta coffee (RMF24) is down -29 (-1.13%).
Coffee prices this morning are moderately lower on signs of bigger supplies. Brazil's Trade Ministry reported late last Friday that Brazil's Nov coffee exports (not roasted) rose +8.5% y/y to 235,000 MT. Also, Honduras, Central America's biggest coffee-producing country, reported its Nov coffee exports jumped +63% y/y to 110,413 bags.
Arabica coffee prices last Friday posted a 6-month high on a new rule from the Intercontinental Exchange (ICE) that bans the resubmission of old coffee inventories, a loophole some sellers use to dodge age penalties. The rule change by ICE is expected to add further pressure to ICE-monitored coffee inventories, providing support for coffee prices.
Shrinking ICE coffee inventories are bullish for coffee prices as ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags last Thursday. Meanwhile, today, ICE-monitored robusta coffee inventories were at 3,750 lots, moderately 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 last Wednesday that Vietnam's Nov coffee exports rose +83% m/m but fell -37.9% y/y to 80,000 MT and that coffee exports in the first eleven months of this year (Jan-Nov) fell -12.9% y/y to 1.38 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.
Below-normal rain in Brazil could curb coffee yields and support prices. Somar Meteorologia reported today that Brazil's Minas Gerais region received 38.7 mm of rainfall in the past week, or 63% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Robusta coffee has carryover support from November 22 when the USDA's FAS cut its 2023/24 Vietnam coffee production estimate to 27.8 million bags from a May estimate of 31.3 million bags, citing unfavorable weather due to the El Nino weather pattern. The USDA's FAS also cut its 2023/24 Vietnam coffee ending stocks estimate to 359,000 bags from a May estimate of 2.76 million bags. Vietnam is the world's largest producer of robusta coffee beans.
On the negative side, the USDA's Foreign Agriculture Service (FAS) on November 22 projected 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.
A bearish factor for coffee prices is an increase in Brazil's coffee exports after exporter group Cecafe reported on November 14 that Brazil's Oct green coffee exports jumped +24% y/y to 4 million bags.
A negative factor for coffee was the projection from Rabobank on November 3 that due to beneficial weather boosting coffee yields, Brazil's coffee exports in the 12 months ending June 2024 could increase as much as +18 % y/y to 42 million bags.
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.
Global coffee exports are shrinking as the International Coffee Organization (ICO) reported on September 14 that global coffee exports during Oct-Jul were down -5.7% y/y at 103.736 mln bags.
The USDA’s FAS 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.
