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December arabica coffee (KCZ24) Monday closed up +12.90 (+5.14%), and November ICE robusta coffee (RMX24) closed up +217 (+4.29%).
Coffee prices Monday rallied sharply due to concerns that adverse global weather in key coffee producers will lead to smaller coffee production. Brazil has been facing the driest weather since 1981, according to the natural disaster monitoring center Cemaden. 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. Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 9.8 mm of rain over the past week, or only 62% of the historical average. Minas Gerais accounts for about 30% of Brazil's arabica crop. Also, robusta coffee has support after heavy rain from typhoon Yagi last week flooded Vietnam's robusta coffee fields and may curb the country's coffee output. Vietnam is the world's largest robusta coffee producer.
Last Monday, Dec arabica and Nov robusta posted contract highs, while nearest-futures (U24) robusta posted a new all-time high. Coffee prices have rallied sharply over the past two weeks as adverse global weather events threaten coffee production.
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. Last Wednesday, the General Department of Vietnam Customs reported that Vietnam's August coffee exports fell -9.9% y/y to 76,214 MT and that Vietnam's Jan-Aug coffee exports fell -12.1% y/y to 1.06 MMT.
A supportive factor for coffee was last Thursday's action by Conab, Brazil's crop forecasting agency, to cut its 2024 Brazil coffee production forecast to 54.8 million bags from 58.8 million bags forecast in May.
On September 10, Cecafe reported that Brazil's Aug green coffee exports rose +1.4% y/y to 3.41 million bags. The rise in Brazil's green coffee exports was consistent with other recent news showing higher exports. The Brazilian Trade Ministry reported on August 7 that Brazil's July coffee exports rose +44% y/y to 202,000 MT. Also, Cecafe reported on July 11 that Brazil's 2023/24 coffee exports rose +33% y/y to a record 47.3 million bags. On a global basis, the International Coffee Organization (ICO) reported on September 6 that global coffee exports rose +12.2% y/y in July to 11.29 million bags and that global exports during Oct-July rose +10.5% y/y to 115.01 million bags.
A rebound in ICE coffee inventories from historically low levels is negative for prices. On September 12, ICE-monitored arabica coffee inventories rose to a 1-1/2 year high of 858,474 bags, 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, 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.
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September Arabica coffee traded
on Monday closed up 5.45 cents/pound and Robusta coffee closed up $163 at
$4,348/ton.
This is the mark where Arabica
coffee price reached its highest level in the past 1 and a half weeks and
Robusta also reached its highest level in more than 1 month. During the
session, Robusta coffee price reached its highest level of 4,390$/ton, which is
close to the high level. The all-time high was reached on June 6 at $4,394/ton.
It is forecasted that both markets will continue to increase without seeing a
stop. In addition to information about drier-than-normal conditions in both of
the world's largest producing countries, Brazil is now also entering winter
with the threat of cold air columns regularly visiting during the winter. This
also makes the market more sensitive to the early cold weather in South
America.
The Brazilian state of Minas
Gerais received just 1.3 millimeters of rain last week, or 24% of the
historical average, meteorological agency Somar Meteorologia reported on
Monday. Additionally, the US National Oceanic and Atmospheric Administration
(NOAA) said that despite recent rain, some coffee producers in Central America
still face moisture shortages after drought at the beginning of the season.
Robusta coffee prices are further
reinforced by concerns that excessive drought in Vietnam will damage coffee
trees and limit global Robusta coffee production. The market is constantly
repeating old information when Volcafe predicted a global Robusta coffee
deficit of 4.6 million bags in 2024/25, although smaller than the deficit of 9
million bags. in the 2023/24 season but this is the fourth consecutive year of
Robusta coffee deficit.
Coffee harvest progress reported
to be fast in Brazil does not appear to have quenched the market's thirst for
buying for either type, as it is clear that market prices are still rising
post-harvest in Indonesia, post-harvest. April harvest with about 20% output of
Colombia (Mitica crop) and now the harvest in Brazil is almost finished with
Robusta and more than 50% Arabica.
News from a Japanese media agency
- Nikkei Asia reports and writes that: World coffee prices increased by about
20% last quarter amid extreme heat in major coffee growing areas in Europe.
ASIAN. Standard Robusta coffee prices in London at the end of June were 18.1%
higher than at the end of March. Arabica coffee futures prices also increased by
20.6%.
The latest COT Position Commitment report from Traders from the London Robusta coffee market shows that Fund Managers have slightly reduced their net long positions by 2.19% as of Tuesday 2nd July 2024. Currently, the number of new registered net buying positions of this component is 31,745 lots, equivalent to 5,290,833 bags.
The latest Traders Commitment
report from the New York Arabica coffee market will be published later today,
July 9, due to the holiday that took place last week.
Based on Brazil's forecast of a
new crop of 69.50 million bags, the report now indicates that to date,
approximately 40.31 million bags of new crop coffee have been harvested. made
up of about 17.16 million bags of Conillon Robusta coffee and about 23.15
million bags of Arabica coffee. Weather conditions are expected to remain cool
and dry for the remainder of this week, with temperatures forecast to be mild
and no unusually low temperatures across Brazilian coffee regions during this
period. this paragraph.
Inventories of certified graded
Arabica coffee held on the New York market were said to have decreased by 9,270
bags last Friday, placing them at 811,359 bags.
The contract difference between
the London and New York markets after converting to cents/pound is currently
around 39.07 Usc/Lb with the lower level on the Robusta side. This is also the
difference in value that Robusta products are still considered very high.
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THE FUTURE OF ROBUSTA COFFEE- PART 1
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