December arabica coffee (KCZ22) on Friday closed down -1.40 (-0.92%), and Jan ICE robusta coffee (RMF23) closed down -7 (-0.39%).
Arabica coffee prices on Friday closed lower, barely managing to stay above Thursday's 16-month nearest-futures low. Â Coffee prices continued to see downward pressure from worries about global demand due to weaker U.S. economic data and spiking Covid rates in China. Â Also, the Green Coffee Association reported Tuesday that U.S. Oct green coffee inventories rose +5.8% y/y to 6,320,157 mln bags.
In a supportive factor for coffee prices, the Brazilian real (^USDBRL) Friday rallied +1.0% and partially recovered from Thursday's 10-month low. Â Friday's modest recovery in the real discourages export selling from Brazil's coffee producers.
Arabica coffee has underlying support from Monday's report from Somar Meteorologia that showed Brazil's Minas Gerais region received 20.6 mm of rain last week, or only 44% of the historical average. Â Minas Gerais accounts for about 30% of Brazil's arabica crop. Â
There is some optimism about Brazil's longer-term coffee crop outlook after World Weather recently said frequent rain and abundant sunshine had created a "pretty good environment" for Brazil's 2023/24 coffee crop. Â However, Cooxupe, Brazil's biggest arabica coffee cooperative, said that next year's harvest is likely to be as weak as this year's harvest due to the slow development of Brazil's new coffee crop.
Coffee prices have underlying support from tight inventories. Â ICE robusta coffee inventories fell to a 4-year low Thursday of 8,743 bags. Â ICE arabica coffee inventories on Oct 28 fell to a 23-year low of 384,795 bags, although those inventories have since rebounded to an 8-week high on Wednesday.
Smaller global coffee exports support coffee prices after the International Coffee Organization (ICO) reported last Monday that global coffee exports during Oct-Sep fell -0.4% y/y to 129 million bags. Â Also, the Colombia Coffee Growers Federation reported on Nov 4 that Colombia's Oct coffee exports fell -5% y/y to 942,000 bags. Â Colombia is the world's second-largest producer of arabica beans. Â Also, Cecafe reported Thursday that Brazil's Oct green coffee exports fell -2.9% y/y to 3.18 mln bags. Â However, 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. Â Vietnam is the world's biggest producer of robusta coffee 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. Â 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. Â 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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