Coffee Prices Slip on Dollar Strength

December arabica coffee (KCZ22) this morning is down -6.40 (-2.85%), and Nov ICE Robusta coffee (RMX22) is down -30 (-1.38%).  

Coffee prices this morning are moderately lower, with robusta falling to a 1-3/4 month low.  A stronger dollar today (DXY00) is undercutting most commodity prices, including coffee.

Robust coffee supplies from Vietnam are bearish for prices.  Vietnam's General Department of Customs reported last Thursday that Vietnam's coffee exports in the nine months through Sep rose +13.7% y/y to 1.35 million metric tons.  Vietnam is the world's biggest producer of robusta coffee beans.  The USDA June 7 revised its 2021-22 coffee production estimate for Vietnam upward to 31.58 million bags from 31.1 million bags but said 2022/23 production would fall by -2.2% y/y to 30.9 million bags.  

Coffee prices are being undercut by news of abundant rain in Brazil that may promote flowering for next year's coffee crop.  Somar Meteorologia reported Monday that Minas Gerais had 51 mm of rain last week, or 185% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Coffee harvest pressures in Brazil are a bearish factor for coffee prices.  Cooxupe cooperative, one of Brazil's biggest coffee producers, reported Sep 21 that Brazil's coffee harvest was 99.4% completed as of Sep 16.  Coffee producer sales typically increase during harvest time to make space for storing their newly-picked crops.  

Abundant U.S. coffee supplies are bearish for coffee prices.  The Green Coffee Association on Sep 15 reported that U.S. Aug green coffee inventories rose +3.6% m/m and +5.2% y/y to a 2-year high of 6,450,086 mln bags.  

Signs of smaller global coffee supplies support prices after the International Coffee Organization (ICO) reported Tuesday that global Aug coffee exports fell -1.9% y/y to 9.9 mln bags and that global coffee exports from Oct-Aug are down -0.3% y/y to 118.86 mln bags.  

Arabica also has support from reduced coffee exports from Colombia.  The Colombia Coffee Growers Federation reported Monday that Colombia's Sep coffee exports dropped -25% y/y to 820,000 bags.  Also, Colombia's Jan-Sep coffee exports are down -6.2% y/y at 8.58 mln bags.  Colombia is the world's second-largest producer of arabica beans.

Tight arabica supplies are bullish for prices after ICE-monitored arabica coffee inventories Monday fell to a 23-year low of 417,306 bags.

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.

• Grains in Q3 and Beyond
• Coffee Closes Moderately Higher on Smaller Global Supplies
• Sugar Prices Underpinned by Higher Crude Prices
• Cocoa Prices Jump on Concern About Next Year's West African Crop