September arabica coffee (KCU24) on Thursday closed down -2.25 (-0.93%), and Sep ICE robusta coffee (RMU24) closed down -91 (-1.99%).
Coffee prices Thursday closed moderately lower, with robusta posting a 1-week low. Weakness in the Brazilian real (^USDBRL) weighed on coffee prices as the real Thursday dropped to a 2-week low against the dollar. The weaker real encourages export selling by Brazil's coffee producers. Meanwhile, robusta is under pressure after ICE-monitored robusta coffee inventories rose to a 1-year high Wednesday of 6,119 lots, signaling increased supplies.
Arabica coffee fell to a 1-week low on Monday after recent rain in Brazil alleviated drought concerns. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 4.6 mm of rain last week, or 329% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Last week, arabica coffee rallied to a 3-month high, and robusta coffee soared to a record high due to concerns that drier-than-normal conditions could adversely affect Brazil's and Vietnam's coffee crops. Also, the National Oceanic and Atmospheric Administration (NOAA) said that despite recent rain, some coffee producers in Central America still face a moisture deficit following a drought at the start of the season.
Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta production. Coffee trader Volcafe said on May 22 that Vietnam's 2024/25 robusta coffee crop may only be 24 million bags, the lowest in 13 years, as poor rainfall in Vietnam has caused "irreversible damage" to coffee blossoms. Volcafe also projects a global robusta deficit of 4.6 million bags in 2024/25, a smaller deficit than the 9-million-bag deficit seen in 2023/24 but the fourth consecutive year of robusta bean deficits.
Smaller coffee supplies from Vietnam, the world's largest robusta coffee producer, are bullish for prices. The General Department of Vietnam Customs reported last Tuesday that Vietnam's June coffee exports fell -11.5% m/m and -50.4% y/y to 70,202 MT, the smallest amount of coffee exports for the month of June in 13 years. Also, Vietnam's Jan-June coffee exports were down -11.4% y/y at 893,820 MT.
A bearish factor for coffee prices was last Thursday's report from Cecafe that showed Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags.
Coffee harvest pressures in Brazil are negative for coffee prices after Safras & Mercado reported last Friday that Brazil's 2024/25 coffee harvest was 66% completed as of July 9, faster than 59% last year at the same time and faster than the 5-year average of 62%. Brazil is the world's largest producer of arabica coffee beans.
A rebound in ICE coffee inventories from historically low levels is negative for prices. ICE-monitored robusta coffee inventories rose to a 1-year high Wednesday of 6,119 lots, up from the record low of 1,958 lots posted in February 2024. Also, ICE-monitored arabica coffee inventories rose to a 16-month high on June 25 of 842,434 bags, up from the 24-year low of 224,066 bags posted in November 2023.
Vietnam's agriculture department said on March 26 that Vietnam's coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. Also, the Vietnam Coffee Association said that Vietnam's 2023/24 coffee exports would drop -20% y/y to 1.336 MMT. 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.
The International Coffee Organization (ICO) reported on July 5 that global May coffee exports rose +9.8% y/y to 11.78 million bags, and Oct-May global coffee exports were up +10.9% y/y to 92.73 million bags.
In a bearish factor, the International Coffee Organization (ICO) projected on May 3 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 bi-annual report released 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.
