July arabica coffee (KCN23) on Tuesday closed up +2.55 (+1.39%), and July ICE robusta coffee (RMN23) closed down -6 (-0.24%).
Coffee prices on Tuesday settled mixed. NY coffee closed higher as ICE-monitored arabica coffee inventories have fallen steadily over the past three months and posted a 5-month low of 650,970 bags Tuesday. However, robusta coffee Tuesday fell back from a 1-1/2 week high and closed lower after ICE-monitored robusta coffee inventories climbed to a 5-month high.
Robusta coffee Tuesday initially found support on smaller coffer exports from Vietnam after the General Department of Vietnam Customs reported Vietnam Apr coffee exports fell -22% m/m at 163,607 MT, and Jan-Apr coffee exports are down -5.5% y/y at 716,580 MT. Vietnam is the world's largest producer of robusta beans.
The International Coffee Organization (ICO) last Thursday reported global 2022/23 coffee exports during Oct-Mar fell -6.4% y/y to 62.295 mln bags.
Reduced coffee supplies from Colombia are bullish for prices after the Colombia Coffee Growers Federation reported last Thursday that Colombian Apr coffee exports fell -15% y/y to 719,000 bags. Colombia is the world's second-largest arabica bean producer.
A negative factor for coffee is drier conditions in Brazil's coffee fields that should accelerate the pace of the country's coffee harvest. Meteorologia reported Monday that Brazil's Minas Gerais region received 0.4 mm of rain in the week ended May 7, or 6% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop.
An excessive long position in robusta coffee futures could fuel long liquidation pressures after last Friday's weekly Commitment of Traders (COT) data showed that funds boosted their net-long positions of robusta coffee futures by 544 in the week ending May 2 to a 16-month high of 40,342 long positions.
Robusta coffee has support from concern that heavy rain will reduce coffee yields in Indonesia, the world's third-biggest robusta producer. In addition, global demand for robusta has increased as roasters and consumers seek cheaper coffee options to cope with high inflation.
Cecafe reported on April 19 that Brazil's Mar green coffee exports dropped -19% y/y to 2.78 mln bags. By contrast, Honduran Mar coffee exports rose +14% y/y to 1.097 million bags. Honduras is Central America's biggest exporter of arabica beans.
Coffee prices also have support as the odds of an El Nino weather event increased, which could likely undercut global coffee production. The U.S. Climate Prediction Center on April 13 raised the likelihood of an El Nino weather pattern emerging between August and October to 74% from 61% a month ago. If that El Nino pattern occurs, it could bring heavy rains to Brazil and drought to India, negatively impacting coffee crop production.
Robusta has support on global supply concerns after coffee trader Volcafe forecasted the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags. In addition, the Association of Indonesian Coffee Exporters and Industries said that Indonesia would see its 2023 coffee production fall -20% y/y to 9.6 mln bags due to damage from excessive rainfall across its growing regions.
The International Coffee Organization (ICO) projects the global 2022/23 coffee market deficit will widen to -7.3 mln bags from a -7.1 mln bag deficit in 2021/22. ICO projects that 2022/23 global coffee production will increase +1.7% y/y to 171.27 mln bags, and 2022/23 global coffee consumption will increase +1.7% y/y to 178.53 mln bags.
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.
