Coffee Prices Slide as ICE Coffee Inventories Rebound

Coffee prices have been sharply lower today due to a recovery in ICE coffee inventories, with arabica coffee (KCN24) and robusta coffee (RMN24) rising to 13-month highs. Insufficient rainfall in Vietnam and Brazil has also contributed to the decline in coffee prices. Vietnam’s Central Highland experienced 195.6 mm of rainfall in the ten days from May 1, 41% below the long-term average. Brazil’s Minas Gerais region received no rainfall or 0% of the historical average for the third straight week, accounting for about 30% of Brazil’s arabica crop.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a bullish factor. Vietnam’s agriculture department projected that its coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The Vietnam Coffee Association also predicted a -20% y/y drop in 2023/24 coffee exports to 1.336 MMT.

Coffee inventories have rebounded from historically low levels, with ICE-monitored robusta coffee inventories recovering to a 5-1/2 month high of 4,071 lots. However, there has been bearish coffee export news, with global Mar coffee exports rising 8.1% y/y to 12.99 million bags and Oct-Mar global coffee exports up 10.4% y/y at 69.16 million bags. Brazil’s 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 has been bullish for coffee prices, as it typically brings heavy rain 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) forecasts 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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