September arabica coffee (KCU24) on Thursday closed down -1.95 (-0.85%), and Sep ICE robusta coffee (RMU24) closed down -36 (-0.84%).
Coffee prices have trended lower over the past three weeks and posted 4-week lows Thursday. Coffee harvest pressures in Brazil are undercutting prices. Safras & Mercado reported last Friday that Brazil's 2024/25 coffee harvest was 81% completed as of July 23, faster than 74% last year at the same time and faster than the 5-year average of 77%. Brazil is the world's largest producer of arabica coffee beans. Brazil's arabica coffee harvest is 75% complete, faster than 65% a year ago and the 5-year average of 69%. The robusta coffee harvest is 95% completed, faster than 89% a year ago, and the 5-year average of 93%.
Weakness in the Brazilian real (^USDBRL) is also undercutting coffee prices as the real fell to a 2-1/2 year low against the dollar Thursday. The weaker real encourages export selling from Brazil's coffee producers.
A rebound in ICE coffee inventories from historically low levels is negative for prices. ICE-monitored robusta coffee inventories rose to a 1-year high last Thursday of 6,521 lots, up from the record low of 1,958 lots posted in February 2024. Also, ICE-monitored arabica coffee inventories rose to a 1-1/2 year high on June 25 of 842,434 bags, up from the 24-year low of 224,066 bags posted in November 2023.
Concerns about dry weather in Brazil are supportive of coffee prices. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received no rain last week, versus the historical average for the week of 5.1 mm. Minas Gerais accounts for about 30% of Brazil's arabica crop.
Arabica coffee also has support after Monday's report from the Coffee Trading Academy projected Brazil's 2024/25 coffee crop at 67.4 million bags, well below an earlier forecast of above 70 million bags.
Smaller coffee exports from Vietnam, the world's largest robusta coffee producer, are bullish for prices. The General Department of Vietnam Customs reported Sunday that Vietnam's July coffee exports fell -35.7% y/y to 70,000 MT. Also, Vietnam's Jan-July coffee exports were down -13.8% y/y at 964,000 MT.
Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta production. Coffee trader Volcafe said on May 22 that Vietnam's 2024/25 robusta coffee crop may only be 24 million bags, the lowest in 13 years, as poor rainfall in Vietnam has caused "irreversible damage" to coffee blossoms. Volcafe also projects a global robusta deficit of 4.6 million bags in 2024/25, a smaller deficit than the 9-million-bag deficit seen in 2023/24 but the fourth consecutive year of robusta bean deficits.
Vietnam's agriculture department said on March 26 that Vietnam's 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. Also, the Vietnam Coffee Association said that Vietnam's 2023/24 coffee exports would drop -20% y/y to 1.336 MMT. The USDA FAS on May 31 projected that Vietnam's robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season.
The International Coffee Organization (ICO) reported on July 5 that global May coffee exports rose +9.8% y/y to 11.78 million bags, and Oct-May global coffee exports were up +10.9% y/y to 92.73 million bags. Cecafe reported on July 11 that Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags.
In a bearish factor, the International Coffee Organization (ICO) said on May 3 that 2023/24 global coffee production climbed +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. ICO also said global 2023/24 coffee consumption rose +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA's bi-annual report on June 20 was bearish for coffee prices. The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.2% y/y to 176.235 million bags, with a +4.4% increase in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags. The USDA's FAS forecasts that 2024/25 ending stocks will climb by +7.7% to 25.78 million bags from 23.93 million bags in 2023/24. The USDA's FAS projects that Brazil's 2024/25 arabica production would climb +7.3% y/y to 48.2 mln bags due to higher yields and increased planted acreage. The USDA's FAS also forecasts that 2024/54 coffee production in Colombia, the world's second-largest arabica producer, will climb +1.6% y/y to 12.4 mln bags.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
