On June 14, 2023, coffee prices fell sharply, with July arabica coffee closing down 3.26% at a 5-month low and July ICE robusta coffee down 6.92% to a 1-year low. The declines were largely driven by an improved supply outlook from Brazil, where the coffee harvest was 35% complete as of June 11, according to Safras & Mercado. This is slightly behind last year’s 37% but aligns with the 5-year average.
Heavy rainfall in Brazil’s major coffee-growing regions has eased previous dryness concerns, contributing to lower prices. Notably, Minas Gerais received 10.6 mm of rain last week, exceeding the historical average for this period. While robusta coffee inventories monitored by ICE dropped to a 1-month low of 5,150 lots, arabica inventories rose to a 4.5-month high of 861,143 bags, placing further pressure on arabica prices.
In contrast, Brazil’s coffee exports fell by 36% year-over-year to 2.8 million bags in May, while Vietnam’s coffee production for the 2023/24 crop year dropped by 20% to 1.472 million metric tons, the smallest yield in four years. The USDA anticipates that Brazil will produce 65 million bags for the 2025/26 season, a 0.5% increase from the previous year.
