Coffee Prices Falter as the Dollar Climbs


Dec arabica coffee (KCZ23) on Tuesday closed down -2.95 (-1.70%), and Jan ICE robusta coffee (RMF24) closed down -64 (-2.64%).

Coffee prices on Tuesday posted moderate losses. A stronger dollar Tuesday sparked long liquidation in coffee futures. Also, abundant rain in Brazil is supportive of coffee yields and bearish for coffee prices. Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received 59.5 mm of rain in the past week, or 135% of the historical average. Minas Gerais accounts for about 30% of Brazil’s arabica crop.

On Monday, Dec NY arabica coffee posted a new 4-1/2 month high, and Jan robusta coffee posted a 1-week high on shrinking ICE coffee inventories. ICE-monitored arabica coffee inventories Tuesday fell to a 24-year low of 337,915 bags. Meanwhile, on Tuesday, ICE-monitored robusta coffee inventories were at 4,071 lots, modestly above the record low of 3,374 lots posted on August 31.

Global coffee exports are shrinking as the International Coffee Organization (ICO) on September 14 reported that global coffee exports during Oct-Jul were down -5.7% y/y at 103,736 mln bags. Cecafe reported on October 11 that Brazil’s Sep arabica coffee exports fell -20% y/y to 2.4 million bags, the lowest for that month in 6 years. However, Brazil’s Sep robusta exports rose more than fourfold to 624,999 bags. Brazil is the world’s largest producer of arabica coffee and the second-largest producer of robusta coffee.

In a supportive factor for robusta coffee, Vietnam’s General Department of Customs reported on October 28 that Vietnam coffee exports in the first nine months of this year (Jan-Sep) fell -9.5% y/y to 1,313 MMT. Also, Vietnam’s coffee harvest this year is expected to drop more than -7% to 1.67 MMT, the smallest crop in four years, according to a Bloomberg survey of exporters and traders released on May 3. Vietnam is the world’s largest producer of robusta coffee beans.

The US Climate Prediction Center on June 8 declared an El Nino weather event, which is likely to be supportive of coffee prices. An El Nino pattern typically brings heavy rains to Brazil and drought to India, negatively impacting coffee crop production. The El Nino event may bring drought to Vietnam’s coffee areas late this year and in early 2024, according to an official from Vietnam’s Institute of Meteorology, Hydrology, and Climate Change.

The USDA Foreign Agricultural Service forecast in its June biannual report, released on June 22, that world coffee production in 2023/24 will increase +2.5% y/y to 174.3 million bags, with a +6.9% increase in arabica production to 96.3 million bags, and a -2.4% decline in robusta production to 78.0 million bags. USDA FAS forecasts that 2023/24 Brazilian coffee production will rise by +14.5% to 67.9 million bags, while Vietnam’s 2023/24 production will fall -3.5% to 30.2 million bags. USDA FAS forecasts that 2023/24 ending stocks will edge higher by +0.8% to 31.8 million bags from 31.6 million bags in 2022-23.

Illustrating a tight coffee supply picture in 2022/23, the ICO said the global 2022/23 coffee market deficit widened to -7.3 million bags from a -7.1 million bag deficit in 2021/22. ICO reported that 2022/23 global coffee production increased +1.7% y/y to 171.27 million bags, but 2022/23 global coffee consumption increased +1.7% y/y to a larger 178.53 million bags.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Tags: Coffee Prices Falter Dollar Climbs


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