Arabica Coffee Settles Higher on Tight Supplies and Brazil Real Strength

Coffee prices have been mixed, with March arabica coffee (KCH24) rising by 4.05 (+2.40%) and Jan ICE robusta coffee (RMF24) falling by -7 (-0.27%). The strength of the Brazilian real (^USDBRL) is a supportive factor for coffee prices, while the USDA’s Foreign Agriculture Service (FAS) projects that Brazil’s 2023/24 arabica production will climb by 12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage. Uganda, the world’s fourth-largest robusta producer, has increased supplies from Uganda, which has risen by 3.4% y/y to 470,080 bags. Brazil’s Minas Gerais region received 5.9 mm of rainfall in the past week, which could curb coffee yields and support prices. The USDA’s FAS cut its 2023/24 Vietnam coffee production estimate to 27.8 million bags due to unfavorable weather due to the El Nino weather pattern. Brazil’s coffee exports have increased by 24% y/y to 4 million bags, while Rabobank projected that Brazil’s coffee exports could increase as much as 18% y/y to 42 million bags. The U.S. Climate Prediction Center declared an El Nino weather event, which is likely to be supportive of coffee prices.

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