Coffee Recovers Early Losses on Strength in Brazilian Real

December arabica coffee (KCZ22) this morning is up +0.55 (+0.29%), and Nov ICE Robusta coffee (RMX22) is up +41 (+2.04%).  

Coffee prices this morning recovered from early losses and are moderately higher.  A rally in the Brazilian real (^USDBRL) to a 1-week high today sparked some short-covering in coffee futures.  A stronger real discourages export selling from Brazil's coffee producers.

Arabica prices Thursday initially fell to a 13-month nearest-futures low on the outlook for a bumper coffee crop next year in Brazil.  Beneficial weather over the past month in Brazil has aided the flowering of coffee trees and bolstered the outlook for next year's coffee crop.  Also, coffee harvest pressures in Brazil are a bearish factor for coffee prices.  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 Monday reported that U.S. Sep green coffee inventories rose +5.2% y/y to 6,378,478 mln bags.  

Larger coffee exports from Brazil are bearish for prices after Cecafe reported last Tuesday that Brazil Sep green coffee exports rose +7.1% y/y to 3.1 mln bags.

Robust coffee supplies from Vietnam are bearish for 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.

Tight arabica coffee bean supplies are bullish for prices after ICE arabica coffee inventories Tuesday fell to a 23-year low of 397,399 bags.  

A supportive factor for coffee prices is drier-than-normal conditions in Brazil's coffee-growing areas.  Somar Meteorologia reported today that Minas Gerais had 13 mm of rain last week, or only 41% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.  

Signs of smaller global coffee supplies support prices after the International Coffee Organization (ICO) reported last 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 last 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.

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.

• Cocoa Prices Consolidate This Week's Sharp Losses
• Sugar Prices Under Pressure on the Outlook for Larger India Sugar Production
• Coffee Prices Close Lower as Supply Outlook Improves
• Coffee Prices Slump on the Outlook for Abundant Global Supplies