Coffee Prices Slip as ICE Coffee Inventories Recover

May arabica coffee (KCK24) and May ICE robusta coffee (RMK24) are down by -0.75 (-0.41%) and -23 (-0.75%), respectively. Coffee prices are moderately lower due to a recovery in ICE-monitored coffee inventories, which rose to a 2-week high today and climbed to a 3-1/2 month high Tuesday. Brazil’s Minas Gerais region received 59.5 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop.

Coffee inventories are tight, which is a supportive factor for coffee prices. Last Wednesday, ICE-monitored robusta coffee inventories fell to a record low of 1,958 lots, although they recovered modestly to a 2-week high today of 2,453 lots. ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, although they recovered moderately to a 3-1/2 month high Tuesday of 333,771 bags.

Larger coffee exports from Brazil are bearish for prices, with Cecafe reporting that Brazil’s Jan coffee exports jumped +45% y/y to 3.7 million bags. The International Coffee Organization (ICO) reported that Dec global coffee exports rose +13.6% y/y to 12.168 million bags, and from Oct-Dec, global coffee exports rose +6.8% y/y to 32.419 million bags.

A negative factor for coffee was the hike by Safras & Mercado to its 2022/23 Brazil coffee crop estimate to 61.1 million bags from a previous estimate of 58.9 million bags. Brazil 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 is bullish for coffee prices, as it typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production. The International Coffee Organization (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.

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