Arabica Settles Higher On Brazil Coffee Crop Concerns

Friday’s close for December arabica coffee (KCZ22) was +6.30 (+2.84%), while Nov ICE Robusta coffee (RMX22) was -12 (-0.54%).

Friday’s coffee prices were mixed. Arabica coffee prices increased on Friday after one of Brazil’s largest coffee producers, the Cooxupe cooperative, predicted that the country’s 2022/23 arabica crop would decrease by 11% year-over-year to 4.0 million bags due to dry weather causing smaller yields. Arabica prices also rose in tandem with the Brazilian real (USDBRL), which reached a one-week high against the dollar on Friday.

After Cooxupe reported that Brazil’s coffee harvest was 95% complete as of September 2, arabica fell to its lowest level in two weeks on harvest pressures. During harvest, coffee producers typically increase their sales to make room for their newly harvested crops.

Robusta coffee is supported by a limited global supply. Vietnam’s General Department of Customs reported on Wednesday that coffee exports fell 1.2% month-over-month and 4.0% year-over-year to 112,531 tons in August. In the big picture, however, Vietnam’s exports increased by 15.3% year-over-year to 1.25 million metric tons in the eight months through August. Vietnam is the largest producer of robusta coffee beans in the world. The USDA on June 7 revised its estimate for Vietnam’s coffee production for 2021-22 from 31.1 million bags to 31.58 million bags, but projected a decline of -2.2% year-over-year to 30.9 million bags for 2022-23.

Reduced coffee supplies from Colombia are a factor in favor of arabica. The Colombia Coffee Growers Federation reported on Monday that the country’s coffee exports in August decreased 21% year-over-year to 872,000 bags. Also, Jan-Aug coffee production in Colombia is down -7% year-over-year to 7.3 million bags. Colombia is the second largest producer of arabica beans in the world.

Concern that excessive dryness in Brazil will reduce coffee yields and limit global coffee supplies also supports coffee prices. Somar Meteorologia reported on Monday that Minas Gerais received only 0.1 millimeters of precipitation in the previous week, which is 1% of the historical average. Minas Gerais is responsible for approximately 30% of Brazil’s arabica crop.

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