Coffee Prices Close Sharply Lower on Rain Forecasts for Brazil

Coffee prices fell to 1-week lows on Wednesday, with March arabica coffee (KCH24) and Mar ICE robusta coffee (RMH24) closing down -97 (-2.95%). Forecasts for rain in Brazil’s coffee-growing regions over the next two weeks weighed on coffee prices. Exporter group Cecafe reported Brazil’s Jan coffee exports jumped +45% y/y to 3.7 million bags, while coffee inventories are tight, which is a supportive factor for coffee prices.

A bearish factor for coffee was last Wednesday’s report from the International Coffee Organization (ICO) that Dec global coffee exports rose +13.6% y/y to 12.168 million bags, and from Oct-Dec global coffee exports rose +6.8% y/y to 32.419 million bags. A negative factor for coffee was last Monday’s hike by Safras & Mercado for its 2022/23 Brazil coffee crop estimate to 61.1 million bags from a previous estimate of 58.9 million bags.

An increase in Vietnam’s coffee exports is bearish for robusta prices, as Vietnam’s General Statistics Office reported that Vietnam’s Jan coffee exports rose +47.6% y/y to 210,000 MT. Coffee buyers are shunning robusta bean purchases from Vietnam due to increased shipping costs and delivery times due to Houthi rebel attacks on commercial ships in the Red Sea.

Tight robusta coffee supplies from Vietnam are bullish for prices, with Vietnam’s General Department of Customs reporting that Vietnam’s 2023 (Jan-Dec) coffee exports fell -8.7% y/y to 1.62 MMT. 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.

Brazil’s crop forecasting agency Conab projected that Brazil’s 2024 arabica coffee production would climb +5.4% y/y to 58.1 million bags, the most productive of Brazil’s biennial coffee year cycle. Dry conditions in Brazil are supporting arabica coffee prices, with Somar Meteorologia reporting that Brazil’s Minas Gerais region received 30.9 mm of rainfall in the past week, or 49% of the historical average.

The International Coffee Organization (ICO) 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. The USDA’s Foreign Agriculture Service (FAS) projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags and a -3.3% decline in robusta production to 74.1 million bags.

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