Coffee Prices Close Sharply Higher on Weather Concerns in Brazil and Vietnam

Coffee prices have surged on Tuesday due to concerns about excessive dryness in Brazil and Vietnam, which could damage coffee crops and curb global production. Brazil’s Minas Gerais region received 5.3 mm of rain or 69% of the historical average in the past week, accounting for about 30% of Brazil’s arabica crop. Coffee trader Volcafe reported that Vietnam’s 2024/25 robusta coffee crop may only be 24 million bags, the lowest in 13 years, as poor rainfall in Vietnam has caused irreversible damage to coffee blossoms. Volcafe also projected a global robusta deficit of 4.6 million bags in 2024/25, a smaller deficit than the 9-million-bag deficit seen in 2023/24 but the fourth consecutive year of robusta bean deficits.

Conab revised its 2024 Brazil coffee production estimate upward last Thursday to 58.8 million bags from a January forecast of 58.1 million bags. Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a bullish factor. On March 26, Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association said that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MMT.

Recent bearish coffee export news include the International Coffee Organization (ICO) reporting that global Mar coffee exports rose +8.1% y/y to 12.99 million bags, and Oct-Mar global coffee exports were up +10.4% y/y at 69.16 million bags. Brazil’s exporter group Comexim raised its Brazil 2023/24 coffee export estimate to 44.9 million bags from a previous estimate of 41.5 million bags.

The El Nino weather event has been bullish for coffee prices, with an El Nino pattern typically bringing heavy rain to Brazil and drought to India, negatively impacting coffee crop production. 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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