Coffee Gains on Dryness in Brazil and Tight Global Supplies

Coffee prices are rising due to concerns about Brazil’s recent dry weather, which could damage coffee crops. The Minas Gerais region in Brazil received only 70.9 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop. Robusta coffee has soared to an all-time nearest-futures high, with ICE-monitored robusta coffee inventories falling to a record low of 3,001 lots. Brazil’s crop forecasting agency, Conab, projected that Brazil’s 2024 coffee production would climb +5.4% y/y to 58.1 million bags, making it the most productive of Brazil’s biennial coffee year cycle.

A negative factor for robusta coffee is signs that coffee buyers are shunning robusta bean purchases from Vietnam due to increased shipping costs and delivery times. Vietnam’s General Department of Customs reported that Vietnam’s 2023 (Jan-Dec) coffee exports fell -8.7% y/y to 1.62 MMT, while Vietnam’s agriculture department projected a drop of 10% to 1.656 MMT due to drought. The Vietnam Coffee Association projected that 2023/24 Vietnam coffee production would fall to 1.6 MMT-1.7 MMT, down from 1.78 MMT a year earlier.

Low coffee inventories are bullish for prices, with ICE-monitored robusta coffee inventories falling to a record low of 3,001 lots. Brazil’s Dec green coffee exports jumped +31% y/y to 3.78 million bags, while Brazil’s Trade Ministry reported a jump of 33.7% y/y to 244 MMT.

An increase in global coffee supplies is negative for prices, as the International Coffee Organization reported that November global coffee exports rose +4.1% y/y to 10.61 million bags and Oct-Nov coffee exports are up +3.1% y/y at 20.25 million bags. The U.S. Climate Prediction Center declared an El Nino weather event on June 8, which is likely to support coffee prices. The International Coffee Organization projected that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year.

Read More @ Nasdaq

Suggested Reading