Arabica Coffee Sharply Lower as ICE-Monitored Arabica Inventories Recover

Coffee prices have been mixed on Monday, with arabica coffee (KCK24) closing down -9.75 (-4.04%) and robusta coffee (RMK24) closing up +44 (+1.08%). A rebound in arabica coffee supplies has sparked long liquidation pressure in arabica futures. ICE-monitored arabica coffee inventories recovered to an 11-month high last Friday, while robusta coffee rose moderately on concerns about tight robusta supplies from Vietnam.

Coffee prices have surged over the past month due to crop concerns in Brazil and Vietnam. Brazil’s Minas Gerais region received 7.6 mm of rainfall in the past week, accounting for about 30% of Brazil’s arabica crop. Robusta coffee has surged to new record highs on fears that excessive dryness in Vietnam will limit the country’s robusta coffee production. Fund buying has supported this month’s surge in coffee prices, with funds boosting their long arabica coffee positions by 4,926 net-long positions to a record 71,811 in the week ended April 16. However, the record-long position could also exacerbate long liquidation pressures in a price downturn.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a major bullish factor. On March 26, Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year could drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association said that Vietnam’s 2023/24 coffee exports could drop -20% y/y to 1.336 MM. Marex Group Plc forecasts a global 2024/25 robusta coffee deficit of -2.7 million bags due to reduced output in Vietnam.

Recent bearish export news includes Brazil’s Mar green coffee exports jumping +41% y/y to 3.9 million bags, and Brazil’s exporter group Comexim raising its Brazil 2023/24 coffee export estimate to 44.9 million bags. 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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