Coffee Prices Finish Higher on Forecasts for Limited Rain in Brazil

Coffee prices in Brazil have risen to 1-1/2 week highs due to forecasts for limited rain in coffee-growing regions over the next week. Recent rainfall in Brazil has been below average, supporting coffee prices. The Minas Gerais region received 6.6 mm of rainfall in the past week, accounting for about 30% of Brazil’s arabica crop. Rabobank predicted a coffee surplus of 4.5 million bags for the upcoming 2024-25 marketing year, up sharply from the 500,000 bag surplus projected for 2023-24. On the bullish side, Rabobank reduced its 2023-24 production forecast by 3.9 million bags to 171.1 million bags, mainly because of downward revisions to production estimates for Indonesia and Honduras.

Coffee inventories have rebounded from historically low levels, with ICE-monitored robusta coffee inventories falling to a record low of 1,958 lots on February 21 and 224,066 bags on November 30, but recovering to an 8-1/2 month high on Thursday of 560,627 bags. May robusta posted a contract high, and March nearest-futures posted a record high on March 7 due to tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans.

Larger coffee exports from Brazil are bearish for prices, with Cecafe reporting that Brazil’s Jan coffee exports jumped +45% y/y to 3.7 million bags. Comexim raised its Brazil 2023/24 coffee export estimate to 44.9 million bags from a previous estimate of 41.5 million bags. The International Coffee Organization (ICO) reported that Jan global coffee exports rose +32.3% y/y to 12.62 million bags, and from Oct-Jan, global coffee exports rose +13.1% y/y to 45.125 million bags.

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.

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