Coffee Prices Settle Lower on Weakness in Brazilian Real

Coffee prices have dropped to 1-week lows and settled sharply lower on Monday due to a slump in the Brazilian real (^USDBRL) and a rise in Brazil’s coffee crop estimate. The Minas Gerais region received 30.9 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop. Low coffee inventories are bullish for coffee prices, with ICE-monitored robusta coffee inventories falling to a record low of 2,735 lots.

An increase in Vietnam’s coffee exports is bearish for robusta prices, as Vietnam’s General Statistics Office reported that its Jan coffee exports rose +47.6% y/y to 210,000 MT. Coffee buyers are shunning robusta bean purchases from Vietnam due to increased shipping costs and delivery times due to Houthi rebel attacks on commercial ships in the Red Sea.

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 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.

The International Coffee Organization (ICO) reported that Brazil’s 2024 arabica coffee production would climb +5.4% y/y to 58.1 million bags, the most productive of Brazil’s biennial coffee year cycle. Increased coffee exports from Brazil are also a bearish factor for coffee prices, with Exporter group Cecafe reporting a 31% y/y increase in Dec green coffee exports to 3.78 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.

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. The FAS forecasts that 2023/24 ending stocks will fall by -4.0% to 26.5 million bags from 27.6 million bags in 2022-23.

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