Coffee Prices Rebound on Forecasts for Limited Rain in Brazil

May arabica coffee (KCK24) and May ICE robusta coffee (RMK24) are up by 4.30 (+2.45%) and 7.30 (+2.32%), respectively. Coffee prices have recovered from 5-week lows, with Brazil’s Minas Gerais region receiving 59.5 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop. Coffee inventories are tight, supporting coffee prices. Last Wednesday, ICE-monitored robusta coffee inventories fell to a record low of 1,958 lots, but they recovered modestly to a 2-week high today of 2,409 lots.

A bearish factor for robusta coffee is Vietnam’s General Statistics Office report that showed Vietnam’s Jan coffee exports rose +14.8% m/m and +67.4% y/y to 238,266 MT. Brazil’s 2024/25 coffee production is expected to increase by +4.2% y/y to 67 million bags. Larger coffee exports from Brazil are bearish for prices, with Cecafe reporting a 45% y/y increase to 3.7 million bags.

Larger coffee exports from Brazil are bearish for prices, with Cecafe reporting a 45% y/y increase to 3.7 million bags. The International Coffee Organization (ICO) reported a 13.6% y/y increase to 12.168 million bags in December, while the Vietnam Coffee Association projected a fall to 1.6 MMT-1.7 MMT due to drought.

Conab, Brazil’s crop forecasting agency, projected Brazil’s 2024 arabica coffee production to climb +5.4% y/y to 58.1 million bags. The 2024 coffee crop year is seen as the most productive of Brazil’s biennial coffee year cycle.

This year’s El Nino weather event is bullish for coffee prices, as it typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production. 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.

Read More @ Trading View

Suggested Reading