December arabica coffee (KCZ24) today is up +2.50 (+1.02%), and November ICE robusta coffee (RMX24) is up +18 (+0.41%).
Coffee prices today are moderately higher, as pre-weekend short covering in coffee futures is boosting prices. Coffee prices have been under pressure this week, with arabica coffee posting a 2-week low Thursday and robusta coffee posting a 2-1/2 month low today.
Improved short-term rainfall conditions in Brazil are undercutting coffee prices. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 36.8 mm of rain over the previous week, or 115% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop. Also, meteorologist Climatempo said Monday that more significant rains are expected in Minas Gerais from Friday onwards, which will keep temperatures milder and improve soil moisture levels.
However, coffee prices have underlying support from concern about longer-term coffee crop damage from Brazilian drought conditions since April. Rainfall in Brazil has consistently been below average since April, damaging coffee trees during the all-important flowering stage and reducing the prospects for Brazil's 2025/26 arabica coffee crop. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden.
Tightness in coffee inventories is supporting coffee prices. ICE-monitored arabica coffee inventories fell to a 4-1/2 month low of 795,874 bags on October 3, and ICE-monitored robusta coffee inventories fell to a 5-3/4 month low of 3,934 lots today. Coffee inventories had recently recovered as ICE-monitored arabica coffee inventories rose to a 1-1/2 year high of 858,474 bags on September 12, up from the 24-year low of 224,066 bags posted in November 2023. Also, ICE-monitored robusta coffee inventories on July 25 rose to a 1-year high of 6,521 lots, up from the record low of 1,958 lots posted in February 2024.
In a bearish factor for coffee prices, the International Coffee Organization (ICO) on Oct 7 reported that global coffee exports rose +6.5% y/y in August to 10.92 million bags and that global exports during Oct-Aug rose +9.9% y/y to 125.67 million bags. Other export news has been bearish. Cecafe reported on Oct 9 that Brazil's Sep green coffee exports rose +34% y/y to 4.1 million bags. Also, Cecafe reported on July 11 that Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags.
Robusta coffee prices are underpinned by fears that excessive dryness in Vietnam will damage coffee crops and curb future global robusta production. Vietnam's agriculture department said on March 26 that Vietnam's coffee production in the 2023/24 crop year dropped by -20% to 1.472 MMT, the smallest crop in four years, due to drought. The USDA FAS on May 31 projected that Vietnam's robusta coffee production in the new marketing year of 2024/25 will dip slightly to 27.9 million bags from 28 million bags in the 2023/24 season. On October 9, the General Department of Vietnam Customs reported that Vietnam's September coffee exports fell -32.6% m/m to 51,369 MT and that Vietnam's Jan-Sep coffee exports fell -11.7% y/y to 1.1 MMT.
In a supportive factor for coffee prices, Conab, Brazil's crop forecasting agency, cut its 2024 Brazil coffee production forecast on September 19 to 54.8 million bags from 58.8 million bags forecast in May.
In a bearish factor, the International Coffee Organization (ICO) said on May 3 that 2023/24 global coffee production climbed +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year. ICO also said global 2023/24 coffee consumption rose +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.
The USDA's bi-annual report on June 20 was bearish for coffee prices. The USDA's Foreign Agriculture Service (FAS) projected that world coffee production in 2024/25 will increase +4.2% y/y to 176.235 million bags, with a +4.4% increase in arabica production to 99.855 million bags and a +3.9% increase in robusta production to 76.38 million bags. The USDA's FAS forecasts that 2024/25 ending stocks will climb by +7.7% to 25.78 million bags from 23.93 million bags in 2023/24. The USDA's FAS projects that Brazil's 2024/25 arabica production would climb +7.3% y/y to 48.2 mln bags due to higher yields and increased planted acreage. The USDA's FAS also forecasts that 2024/54 coffee production in Colombia, the world's second-largest arabica producer, will climb +1.6% y/y to 12.4 mln bags.