March arabica coffee (KCH24) Friday closed down -0.90 (-0.53%), and Jan ICE robusta coffee (RMF24) closed up +54 (+2.17%).
Coffee prices on Friday were mixed. Arabica coffee was under pressure on signs of higher arabica coffee production after the USDA’s Foreign Agricultural Service (FAS) projected on Wednesday that Brazil’s 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to more high yields and increased planted area. . The USDA’s FAS also predicts that 2023/24 coffee production in Colombia, the world’s second largest Arabica producer, will climb +7.5% y/y to 11.5 mln bags.
However, robusta coffee on Friday moved higher today on signs of lower robusta coffee production after the USDA’s FAS on Wednesday cut its 2023/24 Vietnam coffee production estimate to 27.8 million bags from a May estimate of 31.3 million bags, citing adverse weather as a result. . of the El Nino weather pattern. The USDA’s FAS also cut its 2023/24 Vietnam coffee stocks estimate to 359,000 bags from a May estimate of 2.76 million bags. Vietnam is the largest producer of robusta coffee in the world.
Last Thursday, arabica coffee rose to a 5-month high, and robusta coffee climbed to a 2-month high due to shrinking ICE coffee inventories. Arabica coffee inventories monitored by ICE last Thursday fell to a 24-year low of 289,699 bags. Meanwhile today, ICE-verified robusta coffee inventories were at 4,267 lots, moderately above the record low of 3,374 lots posted on August 31.
Below normal rain in Brazil could slow down coffee yields and support prices. Somar Meteorologia reported on Monday that the Brazilian region of Minas Gerais received 5.9 mm of rain in the past week, or 12% of the historical average. Minas Gerais accounts for approximately 30% of Brazil’s arabica crop.
A negative factor for robusta coffee is increased supplies from Uganda, the fourth largest robusta producer in the world. On Monday, the Uganda Coffee Development Authority reported that Uganda’s October coffee exports rose +3.4% y/y to 470,080 bags.
In a supportive factor for robust coffee, Vietnam’s agriculture department on November 3 projected that Vietnam’s coffee production in the 2023/24 crop year could decline by -10% to 1,656 MMT, the smallest crop in four years, due to drought. Vietnam’s General Customs also reported on November 8 that Vietnam’s coffee export in October decreased -14.2% m/m and -48.8% y/y to 43,725 MT and that coffee export in the first ten months of this year (jan-oct) fell -10.7% y/y to 1.3 MMT.
A bearish factor for coffee prices is an increase in Brazil’s coffee exports after export group Cecafe reported last Tuesday that Brazil’s green coffee exports jumped +24% y/y to 4 million bags.
A negative factor for coffee was Rabobank’s projection on November 3 that due to favorable weather boosting coffee yields, Brazil’s coffee exports in the 12 months ending June 2024 could increase by up to +18% y/y to 42 million bags
The US Climate Prediction Center on June 8 declared an El Nino weather event, which is likely to support coffee prices. An El Nino pattern typically brings heavy rains to Brazil and drought to India, negatively affecting coffee crops. The El Nino event may bring drought to Vietnam’s coffee regions at the end of this year and early 2024, according to an official from Vietnam’s Institute of Meteorology, Hydrology and Climate Change.
Global coffee exports are down, as the International Coffee Organization (ICO) reported on September 14 that global coffee exports during October-July decreased -5.7% y/y at 103.736 mln bags.
USDA’s FAS forecast in its June biennial report, published on June 22, that world coffee production in 2023/24 will increase +2.5% y/y to 174.3 million bags, with a +6.9% increase in arabica production to 96.3 million bags, and a -2.4% decrease in robust production to 78.0 million bags. USDA FAS forecasts that 2023/24 Brazilian coffee production will rise by +14.5% to 67.9 million bags, while Vietnam’s 2023/24 production will fall -3.5% to 30.2 million bags . USDA FAS forecasts that 2023/24 ending stocks will increase by +0.8% to 31.8 million bags from 31.6 million bags in 2022-23.
Illustrating a tight coffee supply in 2022/23, the ICO said the global 2022/23 coffee market deficit widened to -7.3 mln bags from a -7.1 mln bag deficit in 2021/22. ICO reported that 2022/23 global coffee production increased +1.7% y/y to 171.27 mln bags, but 2022/23 global coffee consumption increased +1.7% y/y to a larger 178.53 mln bags.
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