Arabica Coffee Closes Lower on Forecasts for Rain in Brazil

Coffee prices on Wednesday settled mixed, with Mar robusta posting a new contract high. Arabica coffee came under pressure as updated weather forecasts called for rain in Brazil’s coffee-growing regions over the next week, easing dryness concerns. Tight supplies support robusta coffee prices, with ICE-monitored robusta coffee inventories near record lows and Vietnam coffee farmers holding back coffee supplies in anticipation of even higher prices.

Low coffee inventories are bullish for prices, as ICE-monitored robusta coffee inventories fell to a record low of 2,931 lots on Monday. Brazil’s crop forecasting agency, Conab, projected that Brazil’s 2024 coffee production would climb +5.4% y/y to 58.1 million bags. Dry weather in Brazil may damage coffee crops and is bullish for prices. Somar Meteorologia reported that Brazil’s Minas Gerais region received 40.8 mm of rainfall in the past week, or 89% of the historical average.

Coffee buyers are shunning robusta bean purchases from Vietnam as shipping costs and delivery times have surged due to attacks by Houthi rebels on commercial ships in the Red Sea. 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.

Tight robusta coffee supplies are bullish for prices, with Vietnam’s General Department of Customs reporting that Vietnam’s 2023 (Jan-Dec) coffee exports fell -8.7% y/y to 1.62 MMT. The International Coffee Organization (ICO) reported that Nov global coffee exports rose +4.1% y/y to 10.61 million bags and Oct-Nov coffee exports rose +3.1% y/y at 20.25 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 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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