May arabica coffee (KCK23) this morning is down -3.70 (-2.08%), and May ICE robusta coffee (RMK23) is down -5 (-0.24%).
Coffee prices this morning are moderately lower for a second day. Ideal growing conditions and reduced concerns about flooding in Brazil's coffee fields are bearish for coffee prices. The drier conditions should allow farmers in Minas Gerais, Brazil's largest arabica growing region, back into coffee fields to apply fertilizers and pesticides. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 11 mm of rain in the week ended March 19, or 24% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
A rebound in ICE inventories is bearish for robusta prices after ICE robusta coffee inventories Thursday rose to a 3-1/2 month high at 7,712 lots.
Last Wednesday, arabica fell to a 7-week low after the Brazilian real (^USDBRL) tumbled to a 2-1/2 month low. A weaker real encourages export selling from Brazil's coffee producers. Also, an increase in U.S. coffee inventories is negative for prices. Last Wednesday, the Green Coffee Association reported that U.S. Feb green coffee inventories rose +5.9% y/y to 6.105 mln bags.
Another bearish factor for coffee was the action by Safras & Mercado on March 3 to raise its Brazil 2022/23 coffee production estimate to 58.9 mln bags from a previous estimate of 57.3 mln bags.
A bullish factor for arabica prices was the projection from the National Federation of Coffee Growers on March 3 that coffee output in Colombia, the world's second-largest producer of arabica coffee, will drop -4.8% y/y to 5 mln bags in the first half of 2023 as excessive rain and cloudy days hurt yields.
Smaller global coffee exports support coffee prices after the International Coffee Organization (ICO) reported on February 2 that Oct-Dec global coffee exports fell -2.8% y/y to 30.27 mln bags. Also, coffee exports from Guatemala, the second-largest coffee producer in Central America, fell -8% y/y in January to 172,439 bags. Last Monday, the Colombia Coffee Growers Federation reported Colombia Feb coffee exports fell -6% y/y to 928,000 bags. Brazil's Feb green coffee exports dropped -35.8% y/y to 2.11 mln bags. Last Thursday, the General Department of Vietnam Customs reported that Vietnam's Feb coffee exports fell -34.2% y/y to 122,833 MT, and Jan-Feb coffee exports fell -14.7% y/y to 283,339 MT. Vietnam is the world's largest producer of robusta beans. By contrast, Honduran Feb coffee exports rose +32% y/y to 863,901 bags. Honduras is Central America's biggest exporter of arabica beans.
Robusta has support after coffee trader Volcafe forecasted the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags. Volcafe predicts Indonesia, the world's third-largest robusta producer, will see its 2023/24 robusta coffee production fall to 9.1 mln bags, the smallest robusta crop in 10 years due to damage from excessive rainfall across its growing regions.
The International Coffee Organization (ICO) on March 10 projected that the global 2022/23 coffee market would be in deficit for a second year following the 4 mln bag to 5 mn bag deficit in 2021/22 due to arabica crop woes. The USDA, in its bi-annual report released on December 23, cut its global 2022/23 coffee production estimate by -1.3% to 172.8 mln bags from a June estimate of 175.0 mln bags. In addition, the USDA cut its 2022/23 global coffee ending stocks estimate by -1.7% to 34.1 mln bags from a June estimate of 34.7 mln bags. Meanwhile, the USDA's Foreign Agriculture Service (FAS) on November 22 cut its Brazil 2022/23 coffee production forecast by -2.6% to 62.6 mln bags from a prior estimate of 64.3 mln bags. This year was supposed to be the higher-yielding year of Brazil's biennial coffee crop, but coffee output this year was slashed by drought.
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.
