Coffee Prices Weighed Down on the Outlook for Larger Global Output

December arabica coffee (KCZ22) this morning is down -5.30 (-2.78%), and Nov ICE Robusta coffee (RMX22) is down -5 (-0.26%).  

Coffee prices this morning are moderately lower, with arabica posting a 13-month nearest-futures low and robusta posting a 3-1/4 month nearest-futures low.  Coffee prices have been under pressure over the past month on the outlook for a bumper coffee crop next year in Brazil.  Beneficial weather in Brazil has aided the flowering of coffee trees and bolstered the outlook for next year's coffee crop.

Robust coffee supplies 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.

Coffee prices are also retreating as soaring global inflation and recession fears have sparked coffee demand concerns and fueled fund selling of coffee futures.  

Abundant U.S. coffee supplies are bearish for coffee prices.  The Green Coffee Association last 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 Oct 11 that Brazil Sep green coffee exports rose +7.1% y/y to 3.1 mln bags.

A supportive factor for coffee was last Friday's action by Safras & Mercado to cut its Brazil 2022/23 coffee production estimate to 57.3 mln bags from a previous estimate of 58.2 mln bags.

Tight arabica coffee bean supplies are bullish for prices after ICE arabica coffee inventories Monday fell to a 23-year low of 388,865 bags.  

A supportive factor for coffee prices is drier-than-normal conditions in Brazil's coffee-growing areas.  Somar Meteorologia reported Monday that Minas Gerais had 28.5 mm of rain last week, or only 86% 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 Oct 11 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 Oct 10 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.

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