Coffee Rallies With Robusta at a Record High on Shrinking Coffee Output in Vietnam

Coffee prices have risen, with arabica coffee climbing to a 2-1/2 week high and robusta posting an all-time nearest futures high. Robusta coffee prices are soaring due to the Vietnam Coffee Association’s forecast that Vietnam’s 2023/24 coffee exports could drop by -20% y/y to 1.336 MMT due to dry weather. The strength of robusta prices Wednesday provided carryover support to arabica coffee.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a major bullish price factor. Vietnam’s General Statistics Office reported that Vietnam’s Feb coffee exports fell -32.8% m/m and -20.1% y/y to 160,584 MT, although total Jan-Feb coffee exports rose +16.2% y/y to 398,000 MT. The agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year could drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. Marex Group Plc forecasts a global 2024/25 robusta coffee deficit of -2.7 million bags due to reduced output in Vietnam.

A negative factor for coffee is the recent above-average rain in Brazil, which eased dryness concerns. Somar Meteorologia reported that Brazil’s Minas Gerais region received 28 mm of rainfall in the past week, or 106% of the historical average. 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.

Larger coffee exports from Brazil are bearish for prices. Cecafe reported that Brazil’s Jan coffee exports jumped +45% y/y to 3.7 million bags. The International Coffee Organization (ICO) recently 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.

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