Coffee Closes Higher on Dry Conditions in Brazil and Tight Robusta Supplies

Coffee prices have seen moderate gains, with robusta coffee climbing to a 2-week high. Concerns about dry weather in Brazil are driving up arabica coffee prices, as the Minas Gerais region received only 42.4 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop. Tight robusta coffee supplies are bullish for prices, propelled nearest-futures robusta prices (RMF24) to a record high. Vietnam’s General Department of Customs reported that its 2023 (Jan-Dec) coffee exports fell -9.6% y/y to 1.60 MMT, and its agriculture department projected a drop of 10% to 1.656 MMT due to drought. The Vietnam Coffee Association projected that 2023/24 Vietnam coffee production would fall to 1.6 MMT-1.7 MMT, down from 1.78 MMT a year earlier.

Low coffee inventories support prices, with ICE-monitored arabica coffee inventories falling to a 24-year low of 224,066 bags on November 30, but recovering slightly to a 6-week high Tuesday of 256,380 bags. Brazil’s Trade Ministry reported a 33.7% y/y increase in Dec coffee exports (not roasted) to 244 MMT. The International Coffee Organization (ICO) reported a 4.1% y/y increase in Nov global coffee exports to 10.61 million bags and an increase of 3.1% y/y at 20.25 million bags.

The U.S. Climate Prediction Center declared an El Nino weather event on June 8, likely to support coffee prices. An El Nino pattern typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production. The 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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