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Arabica Coffee Sinks as Supply Concerns Ease

Coffee prices are under pressure as global coffee supplies ease, with arabica coffee falling sharply. The International Coffee Organization (ICO) projected 2023/24 global coffee production to climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. The ICO also projects global 2023/24 coffee consumption to climb +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.

Signs of higher coffee exports are bearish for prices, as Brazil’s Nov coffee exports rose +8.5% y/y to 235,000 MT. The Intercontinental Exchange (ICE) rule change that bans the resubmission of old coffee inventories is expected to add further pressure to ICE-monitored coffee inventories, providing support for coffee prices.

Shrinking ICE coffee inventories are bullish for coffee prices, as ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags last Thursday. Brazil’s Minas Gerais region received 38.7 mm of rainfall in the past week, which accounts for about 30% of Brazil’s arabica crop.

Robusta coffee has support, with the Vietnam Coffee Cocoa Association projecting 2023/24 Vietnam coffee production to fall to 1.6 MMT to 1.7 MMT, down from 1.78 MMT a year earlier. The USDA’s Foreign Agriculture Service (FAS) projected that Brazil’s 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage.

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