Coffee Prices Display Mixed Trends
Today, arabica coffee (KCK24) shows a positive climb of +1.75 (+0.86%), while ICE robusta coffee (RMK24) experiences a decline of -36 (-0.94%).
Currently, the coffee market is a canvas of mixed strokes, with arabica ascending to a 5-3/4 month peak and robusta claiming a new record high. The landscape is painted with concern over the dry spell in Vietnam, foretelling limitations on robusta coffee production. This anxiety bolsters robusta prices and extends a helping hand to arabica rates. Nevertheless, robusta’s stride was interrupted, swerving downwards as profit-taking took center stage post the elevation in ICE-monitored robusta coffee inventories to a 2-1/2 month high of 3,094 lots.
Factors Influencing Arabica Coffee
Arabica coffee is dancing to the tune of recent heavy rainfall in Brazil’s coffee-growing realms. Reports from Somar Meteorologia paint a picture of Brazil’s Minas Gerais region being drenched with 75.4mm of precipitation in the past week, a staggering 335% of the historical average. Minas Gerais holds the strings to about 30% of Brazil’s arabica crop.
Robusta Coffee in the Limelight
The stage for robusta coffee is set with tight supplies looming over from Vietnam, the world’s chief robusta coffee bean producer. Projections from Vietnam’s agriculture department hint at a potential 20% drop to 1.472 MMT in the 2023/24 crop year, marking the lowest yield in four seasons due to drought. Marex Group Plc chimes in with a forecast of a global 2024/25 robusta coffee deficit of -2.7 million bags, all following a decline in output from Vietnam.
Global Coffee Market Speculations
Speculations flutter around the coffee globe, with Rabobank’s March 14 prediction painting a surplus of 4.5 million bags for the forthcoming 2024-25 marketing year, a sharp spike from the 500,000 bag surplus forecasted for 2023-24. On a sunnier note, Rabobank trims down its 2023-24 production estimate by 3.9 million bags to 171.1 million bags, mainly due to downward revisions in production for Indonesia and Honduras.
Supply Chain Swings
The tides are turning in the coffee inventories realm. ICE-monitored robusta coffee inventories plunged to a historical low of 1,958 lots on February 21, only to rise to a 2-1/2 month pinnacle of 3,094 lots today. Similarly, ICE-monitored arabica coffee reserves spiraled down to a 24-year low of 224,066 bags on November 30, only to soar to a 10-1/4 month high of 616,682 bags on a Wednesday.
Global Export Dynamics
A surge in coffee exports from Brazil spells bearish tones for prices. Cecafe’s recent report highlights Brazil’s Feb arabica coffee exports leaping +36.5% y/y to 2.806 million bags. Brazil’s export potentialities are underlined by Comexim, raising its Brazil 2023/24 coffee export estimate to 44.9 million bags from an earlier 41.5 million bags.
Global Coffee Scene
The International Coffee Organization (ICO) chimes in with numbers, reporting a +32.3% y/y jump in Jan global coffee exports to 12.62 million bags, followed by a +13.1% y/y upward turn in global coffee exports to 45.125 million bags from Oct-Jan.
Weather Patterns and Projections
The clouds are gathering on the horizon with this year’s El Nino weather event casting a bullish spell on coffee prices. An El Nino episode often heralds heavy rains in Brazil and drought in India, playing spoilsport for coffee crop production. The oncoming El Nino may parch Vietnam’s coffee territories late this year and in early 2024, as suggested by an official from Vietnam’s Institute of Meteorology, Hydrology, and Climate Change.
Forecasts and Surpluses
In a contrasting narrative, the International Coffee Organization (ICO) charts a path, projecting a +5.8% y/y surge in 2023/24 global coffee production to 178 million bags, resulting from an unusual off-biennial crop year. ICO’s calculators also tally up global 2023/24 coffee consumption to lift +2.2% y/y to 177 million bags, painting a surplus of a million coffee bags.
The USDA’s Foreign Agriculture Service (FAS) chimes in with its biannual report unveiled on December 21, envisioning world coffee production to climb +4.2% y/y to 171.4 million bags in 2023/24. The forecast includes a +10.7% uptick in arabica production to 97.3 million bags, juxtaposed with a -3.3% drop in robusta production to 74.1 million bags. The same report predicts a -4.0% drop in 2023/24 ending stocks to 26.5 million bags from 27.6 million bags in 2022-23. Noteworthy is Brazil’s projected arabica production surge by +12.8% y/y to 44.9 million bags and Colombia’s expected +7.5% y/y spurt in 2023/24 coffee production to 11.5 million bags.
For more coffee news, look to Barchart.
As of the publication date, Rich Asplund didn’t hold any positions (directly or indirectly) in any of the securities discussed in this article. The content is for informational purposes only. For additional details, please refer to the Barchart Disclosure Policy.
It’s important to note that the opinions expressed here belong to the author and may not align with those of Nasdaq, Inc.
