September arabica coffee (KCU24) on Friday closed up +5.55 (+2.31%), and Sep ICE robusta coffee (RMU24) closed up +94 (+2.06%).
Coffee prices on Friday closed sharply higher, with robusta posting a 3-1/2 week nearest-futures high. Coffee prices rallied Friday on concern that recent dry conditions in Brazil could lead to premature flowering on coffee trees, reducing yields for Brazil's 2024/25 coffee crop. Cooxupe, Brazil's top coffee cooperative, said coffee trees remain stressed as several coffee-growing regions in Brazil have not had meaningful rain in the last 120 days.
Coffee harvest pressures in Brazil are bearish for prices. Safras & Mercado reported Friday that Brazil's 2024/25 coffee harvest was 96% completed as of August 13, faster than 91% last year at the same time and faster than the 5-year average of 93%. Brazil is the world's largest producer of arabica coffee beans.
Robust coffee exports from Brazil are bearish for coffee prices after the Brazilian Trade Ministry reported last Wednesday that Brazil's July coffee exports rose +44% y/y to 202,000 MT. Cecafe on July 11 reported that Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags. The International Coffee Organization (ICO) reported last Monday that global June coffee exports rose +3.8% y/y to 10.78 million bags, and Oct-Jun global coffee exports were up +10.1% y/y to 103.47 million bags.
Dry weather concerns in Brazil temporarily eased, which is bearish for coffee prices. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 8.9 mm of rain last week, or 228% of the historical average for the week of 8.6 mm. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Reduced coffee exports from Vietnam, the world's largest robusta coffee producer, are bullish for prices. Last Friday, the General Department of Vietnam Customs reported that Vietnam's July coffee exports fell -29.3% y/y to 76,982 MT. Also, Vietnam's Jan-July coffee exports are down -12.4% y/y to 979,353 MT.
A rebound in ICE coffee inventories from historically low levels is negative for prices. ICE-monitored robusta coffee inventories on July 25 rose to a 1-year high of 6,521 lots, up from the record low of 1,958 lots posted in February 2024. Also, ICE-monitored arabica coffee inventories rose to a 1-1/2 year high on June 25 of 842,434 bags, up from the 24-year low of 224,066 bags posted in November 2023.
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.
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.
In a bearish factor, 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.
