Coffee Prices Relinquish Some Of Monday’s Sharp Gains

December arabica coffee (KCZ22) on Tuesday closed down -3.10 (-1.74%), and Jan ICE Robusta coffee (RMF23) closed down -14 (-0.76%).

Coffee Prices Relinquish Some Of Monday's Sharp Gains
Coffee Prices Relinquish Some Of Monday’s Sharp Gains

Coffee prices Tuesday fell moderately, with robusta posting a 2-1/2 month low.  Coffee prices Tuesday gave back some of Monday’s sharp rally after a recovery in the dollar sparked long liquidation in coffee futures.

Arabica coffee had support from Somar Meteorologia’s report on Monday that Brazil’s Minas Gerais region had 28.9 mm of rain last week, or only 79% of the historical average.  Minas Gerais accounts for about 30% of Brazil’s arabica crop.

Tight arabica coffee bean inventories are bullish for prices after ICE arabica coffee inventories last Friday fell to a 23-year low of 384,795 bags.

Abundant U.S. coffee inventories are bearish for coffee prices.  The Green Coffee Association on Oct 17 reported that U.S. Sep green coffee inventories rose +5.2% y/y to 6,378,478 mln bags.

Smaller global coffee supplies support prices after the International Coffee Organization (ICO) reported Monday that global coffee exports during Oct-Sep fell -0.4% y/y to 129 million bags.  Also, the Colombia Coffee Growers Federation reported Oct 10 that Colombia’s Jan-Sep coffee exports fell -6.2% y/y to 8.58 mln bags.  Colombia is the world’s second-largest producer of arabica beans.  However, Cecafe reported Oct 11 that Brazil’s Sep green coffee exports rose +7.1% y/y to 3.1 mln bags.

Robust coffee exports from Vietnam are bearish for robusta prices.  Vietnam’s General Department of Customs reported on Oct 7 that Vietnam exported 1.73 MMT of coffee in the 2021/22 season that ended Sep 30, a 4-year high.  Vietnam is the world’s biggest producer of robusta coffee beans.

In a bullish factor, Brazil’s crop agency Conab Sep 20 cut its 2022 Brazil coffee production estimate to 50.4 mln bags from a May estimate of 53.4 mln bags as adverse weather curbed coffee yields.  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.

In a bearish factor, the USDA, in its bi-annual report released on June 23, projected that 2022/23 global coffee production would climb +4.7% y/y to 174.95 mln bags, primarily due to Brazil’s arabica crop entering the on-year of the biennial production cycle.  The USDA projects that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln bags.

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Source: Rich Asplund (Barchart)